Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
OCTOBER 9, 1997
BLACK WARRIOR WIRELINE CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 0-18754 11-2904094
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3748 HIGHWAY 45 NORTH, COLUMBUS, MISSISSIPPI 39701
(Address of principal executive offices)
Registrant's telephone number, including area code: (601) 329-1047
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Diamondback Acquisition. On October 9, 1997, pursuant to an agreement (the
"Agreement") entered into on September 26, 1997, the Company acquired, effective
as of September 1, 1997, all of the business and assets, subject to the
disclosed liabilities, of Diamondback Directional, Inc., a Texas corporation
("DDI"). DDI is engaged in providing oil and gas well drilling services,
primarily in the Texas and Louisiana region, and specializes in short and medium
horizontal drilling as well as conventional directional drilling. The business
will be operated as the Diamondback Division of the Company.
The purchase price for the business and assets acquired was approximately
$9,091,000, of which $2,750,000 was paid in cash, $3,341,000 by issuance of the
Company's promissory notes bearing interest at 6.5% per annum, payable
quarterly, and due on August 31, 1999, and $3,000,000 by issuance of 647,569
shares of the Company's Common Stock. The purchase price is subject to
adjustment, by reduction of the principal amount of the notes, to the extent the
gross receipts from the Diamondback Division operations for the twelve months
ended August 31, 1998 and August 31, 1999 fail to meet a specified performance
standard. The Company has agreed that in the event it files a registration
statement under the Securities Act of 1933 relating to an underwritten public
offering of its shares, the holder of the shares issued in the transaction will
have certain rights to have the shares included in the registration statement.
Pursuant to the Agreement, at the closing the Company entered into
five-year employment agreements with each of Alan Mann and Dale Jowers, the
principal shareholders, officers and Directors of DDI, providing for annual
salaries of $225,000 and $175,000, respectively, pursuant to which such persons
are to be employed by the Company in the Diamondback Division. The employment
agreements contain confidentiality and non-competition provisions. The Company
agreed in the Agreement to reserve 250,000 shares of Common Stock for the grant
of options under the Company's Omnibus Stock Option Plan to persons employed by
the Diamondback Division and also agreed to make the sum of approximately $4
million available to the Diamondback Division, in the form of a loan or other
financial undertaking, for capital improvements which sum is anticipated to be
invested in 1998 and 1999.
2
<PAGE>
See Item 5. Other Events, below, for a description of the terms of the
agreement pursuant to which the Company borrowed $2.9 million from St. James
Capital Partners, L.P. the proceeds of which were used to pay the cash portion
of the purchase price for the assets acquired from DDI and other expenses of the
transaction.
ITEM 5. OTHER EVENTS
On October 9, 1997, the Company entered into an Agreement for Purchase and
Sale (the "Note Purchase Agreement") with St. James Capital Partners, L.P. ("St.
James"), a Delaware limited partnership, whereby St. James purchased and the
Company sold its $2.9 million convertible promissory note (the "Note") bearing
interest at 7% per annum due on October 9, 1999. Payment of principal and
interest on the Note is collateralized by substantially all the assets of the
Company. The Note is convertible into shares of the Company's Common Stock at a
conversion price of $4.6327 per share, subject to anti-dilution adjustment for
certain issuances of securities by the Company at prices per share of Common
Stock less than the conversion price then in effect. St. James has agreed to
subordinate its security interests and rights to the indebtedness and security
interests of the lenders providing up to $4.5 million pursuant to a term loan
and $3.0 million pursuant to a revolving credit facility, neither of which
financings have yet been arranged. St. James was also issued in consideration of
a payment of $36,250 a warrant (the "Warrant") to purchase an aggregate of
725,000 shares of Common Stock exercisable at a price of $4.6327 per share,
subject to anti-dilution adjustment for certain issuances of securities by the
Company at prices per share of Common Stock less than the exercise price then in
effect. The shares issuable on conversion of the Note and exercise of the
Warrant have demand and piggy-back registration rights under the Securities Act
of 1933. The Company agreed that one person designated by St. James would be
nominated for election to the Company's Board of Directors. The Agreement grants
St. James certain preferential rights to provide future financings to the
Company, subject to certain exceptions. The Note contains various affirmative
and negative covenants, including a prohibition against the Company
consolidating, merging or entering into a share exchange with another person,
with certain exceptions, without the consent of St. James. Events of default
under the Note include, among other events, (i) a default in the payment of
principal or interest on the Note; (ii) a default under the 9% Convertible
Promissory Note in the principal amount of $2.0 million dated as of June 5, 1997
and on the 10% Bridge Loan Promissory Note in the principal amount of $3.0
million dated as of June 5, 1997 issued to St. James in June 1997 (the "June
1997 St. James Transaction") and the failure to cure such default for five days;
(iii) a breach of the Company's covenants, representations and
3
<PAGE>
warranties under the Agreement, or the Purchase and Sale Agreement entered into
in connection with the June 1997 St. James Transaction; (iv) a breach under the
other agreements between the Company and St. James, subject to certain
exceptions; (v) any person or group of persons acquiring 40% or more of the
voting power of the Company's outstanding shares who was not the owner thereof
as of October 10, 1997, a merger of the Company with another person, its
dissolution or liquidation or a sale of all or substantially all its assets; and
(vi) certain events of bankruptcy. In the event of a default under the Note, St.
James could seek to foreclose against the collateral for the Note. In addition,
such default would be a default under the notes issued to St. James in the June
1997 St. James Transaction. St. James received an origination fee of $36,250 in
connection with the transaction.
In the Agreement, St. James agreed to convert its $2.9 million convertible
note dated June 5, 1997 (the "Original Convertible Note") into shares of the
Company's Common Stock at such time as the Company has filed a registration
statement under the Securities Act of 1933 relating to the shares issuable on
conversion of the Original Convertible Note, the Note, on exercise of the
warrants issued in connection with the sale by the Company of the notes in the
June 1997 St. James Transaction, and on exercise of the Warrant and such
registration statement has been declared effective.
Of the $2.9 million proceeds from the sale of the Note, $2,750,000 was
applied to the purchase of the DDI assets and the balance was used for
transaction expenses.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
It is impracticable for the Company to provide the required financial
statements for DDI at the time this Current Report on Form 8-K is filed. Such
financial statements will be filed as soon as practicable, but not later than 60
days after the date this Current Report on Form 8-K is required to be filed.
(b) Pro forma financial information.
4
<PAGE>
It is impracticable for the Company to provide the required pro forma
financial information for DDI at the time this Current Report on Form 8-K is
filed. Such pro forma information will be filed as soon as practicable, but not
later than 60 days after the date this Current Report on Form 8-K is required to
be filed.
(c) Exhibits
10.1 Asset Purchase Agreement dated as of September 1, 1997 between Black
Warrior Wireline Corp. and Diamondback Directional, Inc., Alan Mann and Michael
Dale Jowers.
10.2 Employment Agreement effective as of September 1, 1997 between the
Company and Alan Mann.
10.3 Employment Agreement effective as of September 1, 1997 between the
Company and Michael Dale Jowers.
10.4 Registration Rights Agreement dated October 10, 1997 between the
Company and DDI.
10.5 $3.0 million promissory note and $341,096 promissory note due August
31, 1999 issued to DDI.
10.6 Agreement for Purchase and Sale dated October 9, 1997 between Black
Warrior Wireline Corp. and St. James Capital Partners, L.P.
10.7 $2,900,000 Convertible Promissory Note dated October 10, 1997 issued
to St. James Capital Partners, L.P.
10.8 Warrant dated October 10, 1997 to purchase 725,000 shares of Common
Stock issued to St. James Capital Partners, L.P.
10.9 Amendment No. 1 to Registration Rights Agreement between Black Warrior
Wireline Corp. and St. James Capital Partners, L.P. dated October 10, 1997.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BLACK WARRIOR WIRELINE CORP.
Dated: October 24, 1997 By: /s/ William L. Jenkins
-----------------------------
William L. Jenkins, President
6
ASSET PURCHASE AGREEMENT
Agreement made and entered effective the first day of September, 1997 (the
"Effective Date") between and among BLACK WARRIOR WIRELINE CORP., a Delaware
corporation with its principal place of business at 3748 Highway 45, North,
Columbus, Mississippi (hereinafter referred to as "Purchaser") and DIAMONDBACK
DIRECTIONAL, INC., a Texas corporation, which includes its successor by way of
name change (hereinafter referred to as "Seller" or the "Corporation") along
with ALAN MANN and MICHAEL DALE JOWERS (hereinafter referred to as "Principals")
who are the holders of eighty-five percent of all stock of all classes of
Seller.
WHEREAS, Purchaser and Principals are the parties to that certain Letter of
Intent dated September 3, 1997, relating to the acquisition by Purchaser of
Principals' shares in the Corporation;
WHEREAS, the parties desire to amend the letter of intent so that Purchaser
acquires all of the assets of Seller, and to further record their agreement and
provide for the closing thereof.
NOW, THEREFORE, the parties agree as follows:
<PAGE>
I. Sale of Assets
Subject to the terms and conditions set forth below, and to the payment of
the Purchase Price set forth in paragraph 2 herein, the sufficiency of which is
hereby acknowledged, Purchaser agrees to buy and Seller agrees to sell and
convey clear and merchantable title to Purchaser of all of Seller's assets (the
"Assets"), free and clear of all liens and encumbrances, upon the terms and
conditions set forth below. Unless excluded herein the Assets include all of the
assets needed by the Corporation for its continued operation, utilizing the same
means of operation as employed by the Corporation in the past, and include, but
are not limited to:
1.1 The trade name Diamondback Directional, and all related trade names,
trademarks, emblems and descriptions related thereto;
1.2 All of the assets of the Corporation used or useful in the
directional drilling business, whether or not in currently useable condition,
including, but not limited to:
1.2.1 Cash, investment accounts, certificates of deposit, bonds,
prepaid insurance, prepaid utilities, and all other deposits and cash
equivalents of every kind and character, provided that at Closing, the balance
of Seller's existing banking and investment accounts shall be paid over to
Purchaser by wire transfer, with the exception that the $100,000 Earnest Money
provided for by this Agreement shall be retained by Seller.
2
<PAGE>
1.2.2 Copies of the books and records of the Corporation, including
a copy of the Corporation Books, as described above, and all other accounting
and bookkeeping records of every kind and character, including but not limited
to, all computer hardware and software; files; invoices; receipts; indications
of payment; cancelled checks; bank statements and reconciliations, etc;
1.2.3 Telephone Numbers. The telephone numbers, as follows:
(800) 769 5988, (281) 363 2299 and (409) 447 2252
1.2.4 All customer lists;
1.2.5 All leases, including the Equipment Leases and the Real
Property Lease;
1.2.6 All vehicles;
1.2.7 The Receivables.
3
<PAGE>
II. Purchase Price
The Purchase Price for the Assets shall be the sum of:
2.1 the "Earnest Money" paid upon execution of the Letter of Intent, the
sum of one hundred thousand dollars ($100,000);
2.2 $2,650,000.00 in cash, which shall not be offset by the Earnest
Money, to be delivered by wire transfer to the account of Seller at Closing;
2.3 a note (which is one of the "Notes"), in the form attached hereto as
Schedule 2.3, for the sum of $3,000,000.00, said note bearing interest at the
rate of Six and One-Half Percent (6 1/2%), interest to be paid quarterly, and
the principal to be due August 31, 1999, and which Note is subject to adjustment
as provided in Sections 3.3 and 9.8 hereof;
2.4 a note (which is one of the "Notes"), in the form attached hereto as
Schedule 2.3, for one-half of "net receivables", as defined herein, said note
bearing interest at the rate of Six and One-Half Percent (6 1/2%), interest to
be paid quarterly, and the principal to be due August 31, 1999, and which Note
is subject to adjustment as provided in Sections 3.3 and 9.8 hereof;
2.5 six hundred forty-seven thousand five hundred sixty-nine (647,569)
shares of unregistered common stock in Purchaser with a total value of
$3,000,000.00, based on the average bid price of BWWC stock during the
twenty-one (21) days immediately prior to August 28, 1997, which was $4.6327;
2.6 Assumption of the Payables, as that term is hereafter defined; and
2.7 Reservation of the Stock Options provided for in Section 8.6 hereof.
4
<PAGE>
III. Closing Financing Matters
3.1 Certain Definitions. As used in this Agreement, the following terms
are defined as:
3.1.1 Payables. The debts of the Corporation, but only to the
extent reflected on the Closing Financial Exhibit, as hereinafter defined, for
all goods, services, supplies, subcontracts, salaries, equipment rental and all
other debts and expenses incurred by the Corporation, together with all other
liabilities of the Corporation of every kind or character, including a payable
to Seller reflecting income tax liabilities (the "Tax Payable") on Seller's
income from January 1, 1997 through August 31, 1997, calculated as if Seller's
income were taxed at the rate of 39.6%. Payables shall be separately scheduled
on Schedule 3.1.1 hereto.
3.1.2 Receivables. The trade accounts receivable of the
Corporation. Receivables shall be separately scheduled on Schedule 3.1.2 hereto.
3.1.3 Net Receivables. Receivables, less Payables, subject to the
"Adjustment for rebooking IM2 Transaction", shown on Schedule 3.2.
3.2 A Closing Financial Exhibit shall be prepared by Sellers and
attached to this Agreement as Schedule 3.2. The Closing Financial Exhibit shall
reflect that the assets and liabilities of the Corporation as of August 31,
1997, on an accrual basis, including but not limited to, an accrual for taxes,
and insurance audit exposure, for all periods prior to Closing. The Closing
Financial Exhibit shall also confirm the Net Receivables, which shall be used
for the preparation of the note required by Section 2.3 hereof.
5
<PAGE>
3.3 On or before December 31, 1997, and one (1) year and two (2) years
following Closing, Purchaser and Seller shall review the Closing Financial
Exhibit and make adjustments thereto to reflect: (i) actual collections of
Receivables and write-off of bad debts; and (ii) any increase or decrease in
Payables, including the Tax Payable, as otherwise provided by this Agreement.
The December 31, 1997 adjustment shall reflect the changes to Receivables and
Payables as a result of work in progress at August 31, 1997, it being recognized
that it will not be possible to book such work in progress at closing. As a
result of such reconciliations, the amount of the Notes shall be adjusted.
3.4 Closing of this transaction is subject to the Corporation meeting
the following financial conditions:
3.4.1 The debts of the Corporation at August 31, 1997 shall be as
set forth on the Closing Financial Exhibit.
3.4.2 The Assets shall be in good working order, ordinary wear and
tear excepted. Some of the Assets are listed on Schedule 3.4.2 hereto.
Compliance with this requirement shall be verified by representatives of
Purchaser, consulting with Seller immediately prior to Closing.
3.4.3 The Closing Financial Exhibit shall accrue all liabilities of
the company as of August 31, 1997.
6
<PAGE>
3.4.4 The accrued vacation, salary and job bonus benefits due, or
possibly due, to the Corporation's employees and subcontractors, if any,
effective through the close of business on August 31, 1997, shall be as set
forth on Schedule 4.17 hereto.
3.5 In addition to, and without in any way limiting, the warranties and
representations of Seller and Principals granted in this Agreement, Seller and
Principals do hereby jointly and severally warrant the Closing Financial
Exhibit. Seller and Principals hereby indemnify and hold Purchaser harmless from
any and all liabilities of the Corporation existing as of the close of business
on August 31, 1997 that are in excess of the liabilities reflected on the
Closing Financial Exhibit.
IV. Warranties and Representations of Sellers
Seller and Principals do hereby, jointly and severally, give the following
warranties to Purchaser as of August 31, 1997 and as of the Closing Date, which
warranties shall survive Closing:
4.1 Principals warrant that they hold eighty-five percent (85%) of all
of the outstanding stock of the Corporation, cumulatively 850 shares held by
Principals. Principals hold said shares free and clear of all liens,
encumbrances, contracts and commitments. No person holds a preferential right to
purchase said shares held by Principals, nor is any person entitled to any
interest in the proceeds of the sale of said shares.
4.2 The remaining fifteen percent (15%) of the outstanding shares of
stock in the Corporation, being 150 shares, are owned by Joan K. Erickson, the
only other shareholder of the Corporation. Neither the Corporation nor the
Principals are party to any contract, agreement, undertaking or understanding of
any kind or character with Joan K. Erickson. Seller and Principals have no
knowledge that any person holds a preferential right to purchase the shares of
Joan K. Erickson. The sole role and relationship of Joan K. Erickson with the
Corporation is as a shareholder.
7
<PAGE>
4.3 The Corporate Books of the Corporation, a copy of which shall be
delivered to Purchaser contemporaneously with execution of this Agreement,
consists of the following:
Articles of Incorporation, dated February 8, 1995. Bylaws, dated March
1, 1995.
Minutes of Organizational Meeting of Directors, dated March 31, 1995.
Minutes of Annual Meeting of Shareholders dated January 9, 1997.
Minutes of Annual Meeting of Directors dated January 9, 1997.
Consent of the Directors dated June 6, 1997.
Consent of the Directors date June 13, 1997.
Evidence that Certificate No. 1, for 425 shares, was issued to Michael
Dale Jowers.
Evidence that Certificate No. 2, for 425 shares, was issued to Alan
Mann.
Evidence that Certificate No. 3, for 150 shares, was issued to Joan K.
Erickson.
Said Corporate Books and records are true and correct in every respect.
All meetings reflected in said Minutes were held and the Minutes accurately
reflect the proceedings which occurred.
8
<PAGE>
4.4 The Corporation has been operated in the ordinary course of business
during the entirety of its existence. The income and expenses reflected on the
financial books and records of the Corporation are accurately stated. With the
exception of the Earnest Money, there are no items of income other than income
from the directional drilling business, and the expenses are not understated.
Without limiting the generality of the foregoing, from and after September 1,
1997, with the exception of receipt of the Earnest Money, the Corporation has
been operated in the ordinary course of business, and there have been no
payments to or transactions with Principals, other than payment of salaries and
ordinary business expenses.
4.5. The Assets are free and clear of liens and encumbrances, except as
reflected on Schedule 3.4.2, hereto. There exists no condition affecting the
title to or use of any part of the Assets which would prevent Purchaser from
using or enforcing its rights with respect to any part of the Assets, after
Closing, to the same full extent that the Corporation could continue to do so if
the transactions contemplated hereby did not take place. The Assets include all
of the assets needed by the Corporation for its continued operation, utilizing
the same means of operation as employed by the Corporation in the past.
4.6 Schedule 4.6 attached hereto is a complete list containing the name,
address, telephone and facsimile number, and name of contact, for all customers
of the Corporation (herein the "Customers"). Seller and Principals are not aware
of any situation or state of facts and circumstances which would cause the
Customers to discontinue the use of the Corporation for directional drilling
services, to the extent that such Customers require directional drilling
services in the future.
9
<PAGE>
4.7 Schedule 4.7 represents a complete listing of all equipment and
other personal property leases (herein the "Equipment Leases") to which the
Corporation is a party at the date of this Agreement. All of the Equipment
Leases are valid and in full force and effect, and fully state the agreement
between the Corporation and the Lessor. There is no default existing in any of
the Equipment Leases. Unless indicated on Schedule 4.7, all of the Equipment
Leases may be cancelled on not more than thirty (30) days' notice by the
Corporation. Unless noted on Schedule 4.7, the execution of this Agreement will
not violate the terms of any of the Equipment Leases. To further clarify, Seller
has received notice from Bico that the existing lease arrangement will end on
October 8, 1997, and that thereafter, the lease arrangement will be on a time
and materials basis.
4.8 The Corporation is party to a real property lease (herein the "Real
Property Lease") with Jim Carter covering the Corporation's office and shop
located in Conroe, Texas. The Real Property Lease expires October 31, 1997,
however the Lessor has indicated that the Corporation may hold over on a month
to month basis pending its anticipated move to larger quarters. All of the Real
Property Leases are valid and in full force and effect, and fully state the
agreement between the Corporation and the Lessor. There is no default existing
in any of the Real Property Leases.
4.9 Schedule 4.9 is a complete listing of all subcontractors, (herein
the "Subcontractors"), utilized by the Corporation within the past six (6)
months. There are no agreements of any kind or character, written or oral, which
require the Corporation to continue to use the Subcontractors. Except as noted
on Schedule 4.9, Sellers are not aware of any set of facts or circumstances
which would cause the Subcontractors to not perform services for the Corporation
in the future, if requested by the Corporation. All amounts due to driller
Subcontractors have been either paid in full or booked on the Closing Financial
Statement, with the exception of amounts due for work in progress at August 31,
1997, which shall be included in the December 31, 1997 adjustment provided for
in Section 3.2 hereof.
10
<PAGE>
4.10 Schedule 4.10 contains a complete listing of all suppliers of goods
and services to the Corporation within the past six months, other than the
Equipment Leases and the Subcontractors, pursuant to contracts which either (i)
involve expenditures of greater than $10,000 annually, or (ii) which cannot be
cancelled by the Corporation on notice of thirty (30) days or less.
4.11 The Corporation and the business that it operates is in compliance
with all applicable laws and regulations, including without limitation licensing
and environmental laws.
4.12 The financial records and descriptive information relating to the
operation of the Corporation previously furnished to Purchasers, including,
without limitation, the tax returns, financial statements, income statements and
customer lists, as well as the Closing Financial Exhibit, are true and correct.
4.13 The operating assets of the Corporation are in good and workable
condition, ordinary wear and tear excepted.
4.14 The Corporation is a corporation, duly organized, validly existing
and in good standing under the laws of Texas. All of the outstanding capital
stock of the Corporation is validly issued, fully paid and non-assessable.
Without limiting the generality of the foregoing, the Corporation has no
obligation to issue any stock to any person.
4.15 Seller's execution, delivery or performance of this agreement,
including without limitation the execution and completion of any agreement
contemplated hereby, has been approved by Seller's Board of Directors, and shall
be submitted to a vote of Seller's shareholders pursuant to Article 5.10 of the
Texas Business Corporation Act. Principals shall vote in favor of approval of
this agreement, both in their capacity as directors and as shareholders. Subject
to such shareholder approval, the execution, delivery and performance of this
agreement, including without limitation any agreement contemplated hereby, will
not violate or conflict with any provision of the Corporation's Certificate of
Incorporation, Bylaws or other corporate documents, nor will it violate or
constitute an event of default, or permit acceleration of any obligations,
pursuant to any agreement, including, without limitation, debt agreements, to
which the Seller is a party.
11
<PAGE>
4.16 Except as provided in Schedule 4.16, the Corporation is not party
to any contracts calling for the Corporation to either provide or acquire goods
or services. Without limiting the generality of the foregoing, there has been no
contract or quotation, arrangement or understanding for the future sale of
services by the Corporation which extends beyond thirty (30) days, except for
the outstanding quotes and proposals scheduled on Schedule 4.16, hereto.
4.17 Other than the Employment Agreements called for in Article X
hereof, the Corporation is not a party to any labor contracts of any kind,
including, without limitation, collective bargaining agreements. There are no
compensation plans, pension, and retirement plans, bonus and saving plans,
vacation or sick leave plans or policies (except as disclosed on Schedule 4.17
hereto), or disability plans to which the Corporation is a party. The accrued
vacation for each employee is scheduled on Schedule 4.17 hereto. The Corporation
maintains group heath insurance coverage on of its employees.
4.18 The Corporation has filed all tax returns and filings which the
Corporation is required to file with the appropriate government agencies, and
the information set forth in tax returns is true, correct and complete. Without
limiting the generality of the foregoing, the income and franchise/share tax
returns (for U.S. and all required States) have been filed and is correct.
4.19 Except as reflected on Schedule 4.19, there is no litigation,
pending or threatened, against the Corporation. Except as reflected on Schedule
4.19, there is no litigation, pending or threatened, against the Principals with
respect to the directional drilling business of the Corporation.
4.20 Set forth on Schedule 4.20 is a list of all permits, licenses,
approvals or authorizations of any governmental authority or other person which
are used to conduct the business of the Corporation. All such permits, license,
approvals and authorizations are in full force and effect. To the knowledge of
Principals, no proceeding is pending to revoke or limit any of such permits or
otherwise impose any conditions or obligations on the possession or transfer of
any of them, to the extent the same are transferable. Without limiting the
generality of the foregoing, as of Closing, Seller and Principals are unaware
that the plan of Principals to build and operate motors and associated downhole
equipment will require Purchaser to obtain a license from any person, or will
infringe on any patent.
4.21 Except as set forth on Schedule 4.21, no officer, director or
employee of the Corporation, and no relative thereof: (i) owns, directly or
indirectly, any interest in any tangible or intangible property, asset or right
which the Corporation uses in its business; (ii) has any cause of action or
claim against, owes any amount to, or is owed any amount by the Corporation;
(iii) is a party to any Contract with the Corporation; or (iv) is a supplier of
goods and/or services to or a subcontractor of Seller.
12
<PAGE>
4.22 Investment Representation Letter. At Closing, Seller shall have
full authority to execute and deliver the Investment Representation Letter
attached hereto as Exhibit 4.22.
V. Debts, Liabilities
5.1 Purchaser shall be responsible for and shall pay only the debts and
liabilities reflected on the Closing Financial Exhibit, together with those
debts and liabilities incurred in the ordinary course of business subsequent to
12:00 midnight on August 31, 1997, none of which shall be the responsibility of
Seller.
5.2 Purchaser shall not assume or become liable to Seller, or to any
other person, firm, corporation or entity, for any other liabilities or
obligations of Seller, whether accrued, absolute, contingent or otherwise.
Seller and Principals hereby indemnify the Purchaser from all liabilities and
obligations arising from operation of the Corporation prior to 12:00 midnight on
August 31, 1997, other than those reflected on the Closing Financial Exhibit,
including, without limitation, any of the following not reflected on the Closing
Financial Exhibit: any indebtedness for borrowed money, any liability for taxes,
any liability for goods or services purchased, sold or rendered, or any suit or
claim seeking recovery for injury to persons or property resulting from any
product or service heretofore sold or rendered by the Corporation, plus
reasonable attorney fees; provided that such indemnity shall be secondary to any
and all insurance available, including but not limited to insurance purchased by
the Corporation prior to Closing and insurance purchased by the Corporation or
Purchaser subsequent to Closing.
5.3 Purchaser agrees to indemnify Seller from and against any and all
claims, damages, losses, charges, liability and expenses, including reasonable
attorney fees, imposed upon the Sellers but arising out of or resulting from
operation of the business from and after 12:00 midnight on the Closing Date;
provided that such indemnity shall be secondary to any and all insurance
available, including but not limited to insurance purchased by the Corporation
prior to Closing and insurance purchased by the Corporation or Purchaser
subsequent to Closing.
13
<PAGE>
VI. Representations and Warranties of Purchaser
6.1 Purchaser is a corporation duly organized and existing under the
laws of the State of Delaware. Execution and closing of this Agreement has been
authorized by all requisite authority of Purchaser.
6.2 Purchaser has obtained all necessary approvals of all regulatory
bodies for the execution of this Agreement and the closing of this transaction.
6.3 Timely Filing of Reports. Purchaser covenants and agrees that it
will file all reports required to be filed by it pursuant to the Securities Act
of 1933 and the Securities Exchange Act of 1934, each as amended from time to
time, and the rules and regulations adopted by the Commission thereunder (or, if
Purchaser is no longer required to file such reports, it will, upon the request
of Seller, make publicly available such other information for so long as it is
necessary to permit sales under Rule 144 promulgated under the Securities Act of
1933, as amended), and it will take such further action as Seller may reasonably
request, all to the extent required from time to time to enable Seller to sell
shares of Common Stock without registration under the Securities Act within the
limitations of the exemptions provided by Rule 144, as the same may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission. Upon the request of Seller, Purchaser will deliver to Seller a
written statement as to whether it has complied with such requirements.
Purchaser shall bear all costs associated with compliance of this Section 6.3.
6.4 NASDAQ Quotation. Purchaser agrees to use all reasonable efforts to
cause the shares of Purchaser's Common Stock issuable to Seller pursuant to this
Agreement to be approved for quotation on the NASDAQ Stock Market, subject to
official notice of issuance, on or before the Closing Date.
6.5 Registration Rights. On the Closing Date, Purchaser and Seller shall
each execute and deliver a Registration Rights Agreement providing that if at
any time and from time to time Purchaser shall determine to pursue an
underwritten public offering of its Common Stock, other than a registration
relating to securities offered under employee benefit plans, Purchaser shall
promptly give written notice to Seller thereof, and shall request the managing
underwriter or underwriters to include in such registration, and in any
underwriting involved therein, the number of shares of Common Stock owned by
Seller as specified in a written request from Seller. Such Registration Rights
Agreement shall provide that all expenses incident to Purchaser's performance of
or compliance with the registration obligations pertaining to shares of its
Common Stock held by Seller, including without limitation, all registration and
filing fees payable to the Securities and Exchange Commission (the "Commission")
and the National Association of Securities Dealers, Inc., printing expenses,
fees and disbursements of counsel for Purchaser and its independent certified
public accountants, but excluding underwriting discounts and commissions
attributable to the sale of shares held by Seller, shall be borne by Purchaser.
In the event the number of shares requested to be including in the offering,
when combined with the number of shares to be included in the offering by other
selling shareholders is greater, in the opinion of the managing underwriter,
than can be accommodated without adversely affecting the proposed offering, then
the amount of shares of Common Stock held by Seller included in the Seller
request for registration, as well as the number of securities of any other
selling shareholders, so long as such other selling shareholders do not hold
senior registration rights, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter.
14
<PAGE>
VII. Closing
Closing shall occur not later than ten (10) days following receipt by
Purchaser of the items required by Section 7.1(iv), below, but in no event later
than October 15, 1997 (the "Closing Date"), effective at midnight Central time
on the Effective Date. At Closing:
7.1 Sellers shall deliver to Purchaser the following:
(i) a fully executed Transfer, Bill of Sale and Assumption
Agreement, in the form attached hereto as Schedule 7.1(i)(1)
and a fully executed Assignment and Assumption of Real Property
Lease in the form attached hereto as Schedule 7.1(i)(2); and;
(ii) Certificates of title to all vehicles;
(iii) the Employment Agreements described in Article X hereof, fully
executed by Sellers; and
(iv) Minutes, certified by Principals, of the meetings of the Board
of Directors and Shareholders of Seller, approving the
execution and performance of this contract by Seller, together
with all notices related thereto;
(v) the Investment Representation Letter attached hereto as Exhibit
4.22, fully executed by Seller; and
(vi) such other documents and agreements as are reasonably required
to complete the transaction contemplated hereby.
7.2 At Closing, Purchaser shall deliver to Sellers the following:
(i) the cash referred to in Article II;
(ii) the Notes referred to in Article II;
15
<PAGE>
(iii) the Employment Agreements described in Article X hereof, fully
executed by Purchaser;
(iv) a resolution of Purchaser's Board of Directors, approving this
Agreement and the Closing thereof;
(v) a fully executed Transfer, Bill of Sale and Assumption
Agreement, in the form attached hereto as Schedule 7.1(i)(1)
and a fully executed Assignment and Assumption of Real Property
Lease in the form attached hereto as Schedule 7.1(i)(2); and;
(vi) such other documents and agreements as are reasonably required
to complete the transaction contemplated hereby.
VIII. Conditions to Closing
This Agreement and the Closing thereof is subject to the following
conditions:
8.1 All representations and warranties made by the Seller, Principals
and Purchaser shall be true and correct as of the Closing Date;
8.2 Seller shall furnish a certificate of good standing for the
Corporation, in the State of Texas.
8.3 Seller shall furnish the complete results, including copies of a
Form UCC-11 Search for financing statements relating to the Corporation and all
of the Assets, showing no liens other than those reflected on the Closing
Financial Exhibit.
8.4 Seller's execution, delivery or performance of this agreement,
including without limitation the execution and completion of any agreement
contemplated hereby, shall be submitted to and approved by a vote of Seller's
shareholders pursuant to Article 5.10 of the Texas Business Corporation Act.
16
<PAGE>
8.5 Purchaser's execution, delivery or performance of this agreement,
including without limitation the execution and completion of any agreement
contemplated hereby, shall be submitted to and approved by a vote of Purchaser's
Board of Directors.
IX. Access to Information, Post-Closing Matters,
Continued Assurances
9.1 Prior to Closing. Prior to Closing, Purchaser shall have full and
complete access to the Assets, along with all offices and facilities of the
Corporation and to the Corporation' books and records for the purpose of
reviewing same in connection with the transaction contemplated hereby. Should
the transaction contemplated hereby not close for any reason whatsoever,
Purchaser agrees to maintain the confidentiality of all information gathered
during its evaluation of the Corporation' business and the Corporation' assets,
and hereby agree not to use in any way, or disclose such information, unless
Purchaser is legally obligated to disclose any such information.
9.2 Continued Access to Records.
9.2.1 From and after closing, and for three years thereafter, the
corporate, financial and other records and documents of the Corporation prior to
Closing, not otherwise provided for herein (the "Books") shall be available on
three days prior written notice during normal business hours of 8:00 am to 5:00
pm Columbus, Mississippi time for inspection, use and copying by Seller.
9.3 Continued Assurances. Purchaser, Seller and Principals will do,
execute, acknowledge and deliver, all and every such further acts, conveyances,
transfer orders, notices, releases and acquittances and such other instruments
as may be reasonably necessary or appropriate to assure to Purchasers, Seller
and Principals, their successors and assigns, more fully all of the respective
properties, rights, titles and interests, estates, remedies, powers and
privileges by this agreement granted, bargained, sold, conveyed, assigned,
transferred, set over and delivered, or otherwise vested in Purchaser and/or
Seller or intended to be so. Without limiting the generality of the foregoing,
Seller, Principals and Purchaser agree to provide such statements and
confirmations as are required from time to time by their respective accountants
in their continued work for the parties, including without limitation, audit
confirmations.
9.4 Payment of Tax Payable. The Tax Payable shall be paid to or for the
benefit of Seller on January 14, 1997, by wire transfer or other immediately
available funds, as directed by Seller.
9.5 Final Action by Sellers. The Seller shall prepare and file all tax
filings required of it, including income tax returns. Within 30 days after
Closing, Seller shall change its name, so as to not include the words
"Diamondback" or "Directional."
17
<PAGE>
9.6 Stock Options Reserved. Purchaser has reserved stock options
covering 250,000 shares of Purchaser's stock for distribution to certain
employees, other than Principals, said employees to be hired at the direction of
Alan Mann and Purchaser. Said options shall be distributed annually according to
vesting schedules as set forth in employment agreements to be executed with such
employees as approved by Alan Mann and Purchaser. Said options are to be issued
pursuant to Purchaser's Omnibus Stock Option Plan, as approved by Purchaser's
Shareholders. Nothing in this Agreement, including without limitation this
Section 9.6, shall be deemed for the benefit of such employees, it being the
intent and agreement of the parties that such employees are not third-party
beneficiaries of this Agreement.
9.7 Investment in Capital Items. Purchaser commits to make approximately
Four Million Dollars ($4,000,000) available to the business which operates or
uses the name and/or trademark sold hereunder, in the form of a loan or other
appropriate financial undertaking, for capital improvements. These investments
are to be undertaken on projects as agreed by Alan Mann and Purchaser, it being
anticipated that these investments will be made during the calendar years 1998
and 1999.
9.8 Post-Closing Performance Standard, Possible Notes Adjustment. The
Notes are subject to a possible downward adjustment, as set forth in Section
9.8.2 and 9.8.3, if the results of the directional drilling business to be
formed by Purchaser with the Assets, to be known as Diamondback Directional
Company and to be operated as a separate division of Purchaser, or of
Purchaser's subsidiary, Boone Wireline Co., Inc. (herein, the "Business") do not
meet the performance standards set forth in Section 9.8.1.
9.8.1 Performance Standard. The Performance Standard shall be
ninety percent (90%) of the sum of: (i) the gross receipts of Seller for the
period January 1, 1997 through August 31, 1997, as reflected on the Closing
Financial Exhibit, and (ii) the gross receipts of the Business for the period
September 1, 1997 through December 31, 1997.
9.8.2 Adjustment for 1998 results. If the gross receipts of the
Business for the period September 1, 1997 through August 31, 1998 (the "1998
Results") are not at least equal to the Performance Standard, then the principal
balance of the Notes, as previously adjusted, shall be adjusted downward, as
follows:
(a) the balance of the Notes, after considering the adjustments
required by Section 3.3 hereof (the "1998 Balance"), shall be divided by two,
the result of which shall be the "1998 Initial Amount";
(b) the 1998 Initial Amount shall be multiplied by the 1998
Results, and the product thereof shall be divided by the Performance Standard,
the final product thereof being the "1998 Final Amount"; and
(c) the balance of the Notes, as previously adjusted, shall be
reduced by the difference between the 1998 Initial Amount and the 1998 Final
Amount.
18
<PAGE>
9.8.3 Adjustment for 1999 results. If the gross receipts of the
Business for the period September 1, 1998 through August 31, 1999 (the "1999
Results") are not at least equal to the Performance Standard, then the principal
balance of the Notes, as previously adjusted, shall be adjusted downward, as
follows:
(a) the balance of the Notes, after considering the adjustments
required by Section 3.3 hereof and the adjustment required by Section 9.8.2 (the
"1999 Balance"), shall be divided by two, the result of which shall be the "1999
Initial Amount";
(b) the 1999 Initial Amount shall be multiplied by the 1999
Results, and the product thereof shall be divided by the Performance Standard,
the final product thereof being the "1999 Final Amount"; and
(c) the balance of the Notes, as previously adjusted, shall be
reduced by the difference between the 1999 Initial Amount and the 1999 Final
Amount.
X. Employment and Non-Competition Agreements
10.1 At or prior to Closing, Purchaser and Alan Mann shall enter into an
Employment Agreement calling for his employment with Purchaser, which Employment
Agreement shall include a non-competition agreement, prohibiting competition in
the Directional Drilling Business in the States of Texas, Louisiana, New Mexico,
Wyoming, Colorado, Montana, Oklahoma, Alabama, North Dakota, South Dakota and
Mississippi, which area is deemed reasonable by the parties considering the
prior and anticipated business plan of the Purchaser. The form of the Employment
Agreement is attached hereto as Schedule 10.1.
19
<PAGE>
10.2 At or prior to Closing, Purchaser and Dale Jowers shall enter into
an Employment Agreement calling for his employment with Purchaser, which
Employment Agreement shall include a non-competition agreement, prohibiting
competition in the Directional Drilling Business in the States of Texas,
Louisiana, New Mexico, Wyoming, Colorado, Montana, Oklahoma, Alabama, North
Dakota, South Dakota and Mississippi, which area is deemed reasonable by the
parties considering the prior and anticipated business plan of the Purchaser.
The form of the Employment Agreement is attached hereto as Schedule 10.2.
10.3 It is agreed by the parties hereto that, in the event of any breach
of the non-competition provisions of the Employment Agreements, legal remedies
available to the Purchaser would be inadequate. Therefore, in the event of such
breach, the Purchaser is specifically authorized to apply to a court of
competent jurisdiction to enjoin any violation of such provision.
XI. No Assignment
Neither this Agreement, nor any right, interest or obligation hereunder,
may be assigned by either of the parties hereto without the prior written
consent of the other party(s), except that Purchaser may assign this Agreement,
in whole or in part, to its subsidiary Boone Wireline Co., Inc., provided that
no such assignment shall relieve Purchaser of any obligations created hereunder.
XII. Multiple Counterparts
Any number of counterparts of this Agreement may be executed, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one and the same agreement, binding
on both the parties notwithstanding that both parties have not signed the same
counterpart.
XIII. Modifications
This Agreement contains the entire agreement between the parties, and there
shall be no waiver, modification or change of the terms of this Agreement
without the written approval of the parties hereto.
XIV. Captions
The titles of the Articles and Paragraphs and the captions of this
Agreement have been assigned thereto for convenience and reference only and in
no way define, describe, extend, or limit, nor be construed as limiting,
defining or affecting the substantive terms, scope or intent of this Agreement.
XV. Entire Agreement, Integration, Amendment
This Agreement, together with the accompanying Schedules attached hereto,
constitutes the entire agreement among the parties hereto, as a complete and
final integration thereof. All understandings and agreement heretofore had
between and among the parties with respect to the subject matter of this
Agreement are merged into this Agreement, which alone fully and completely
expresses their understandings, and this Agreement supersedes all prior
memoranda, correspondence, conversations and negotiations.
20
<PAGE>
There have been and are no agreements, representations or warranties
between the parties other than those set forth or provided herein.
No representation or warranty made by any party which is not contained in
this Agreement or expressly referred to herein has been relied on by any party
in entering into this Agreement.
XVI. Notices
All notices, requests, demands, and other communications hereunder shall be
in writing and shall be deemed to have been duly given and delivered upon
personal delivery or, if mailed, upon depositing such notice in the United
States mail, with first class postage prepaid, and
(i) If to the Purchaser, to:
Black Warrior Wireline Corp
3748 Highway 45, N
Post Office Box 9188
Columbus, Mississippi 39705
Attn: William L. Jenkins
(ii) If to the Seller, to:
Diamondback Directional, Inc.
13843 Highway 105 West, Suite 212
Conroe, Texas 77304
(iii) If to Principals, to:
Mr. Alan Mann
13843 Highway 105 West, Suite 212
Conroe, Texas 77304
Mr. Michael Dale Jowers
13843 Highway 105 West, Suite 212
Conroe, Texas 77304
Any party may change the address to which notices are to be delivered to such
party, by notice given in accordance with this subparagraph to the other party.
XVII. Governing Law
The laws of the State of Mississippi shall govern the validity,
construction, and interpretation of this Agreement.
XVIII. Miscellaneous
18.1 Gender, Number. All personal pronouns used in this Agreement shall
include all genders, whether used in the masculine, feminine, or neuter gender.
Singular nouns and pronouns shall include the plural, as may be appropriate, and
vice versa.
21
<PAGE>
18.2 Severability. All of the terms, provisions, and conditions of this
Agreement shall be deemed to be severable in nature. If, for any reason, the
provisions hereof are held to be invalid or unenforceable to any extent, to the
extent that such provisions are valid and enforceable, a court of competent
jurisdiction shall construe and interpret this Agreement to provide for maximum
validity and enforceability of this Agreement.
18.3 Successors. This Agreement shall bind the parties and their heirs,
successors, assigns, next of kin, and personal representatives.
18.4 Construction. This Agreement shall be construed in its entirety
according to its plain meaning and shall not be construed against the party who
provided or drafted it.
18.5 Party. The terms party and parties refer to the parties to this
Agreement, unless otherwise stated.
18.6 Subdivision. References to paragraphs, subparagraphs, and like
subdivisions are references to such subdivisions of this Agreement, unless
otherwise stated.
18.7 Hereof. Terms such as "hereof", "hereto", "hereunder", "herein",
and the like refer to the entire Agreement and not only to the subdivision in
which such terms appear.
18.8 Costs on Default. In the event of any default by any party as to
any duty, warranty or undertaking owed to another party, which default results
in efforts by the non-defaulting party to remedy same (whether a lawsuit is
filed or not), the defaulting party shall pay, in addition to such other sums as
may be due hereunder, all costs and expenses of such efforts, including, but not
limited to, a reasonable attorney's fee.
22
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
effective on the day and date first above written.
PURCHASER:
WITNESS: BLACK WARRIOR WIRELINE CORP.
BY:
William L. Jenkins, President
SELLER:
WITNESS: DIAMONDBACK DIRECTIONAL, INC.
BY:
Alan Mann, President
WITNESS: PRINCIPALS:
ALAN MANN
WITNESS:
MICHAEL DALE JOWERS
23
EMPLOYMENT AGREEMENT
WITH NON-COMPETITION AGREEMENT
COVERING THE DIRECTIONAL DRILLING BUSINESS
By this Agreement, BLACK WARRIOR WIRELINE CORP., a Delaware corporation,
referred to in this Agreement as Employer, located at 3748 Highway 45, North,
Columbus, Mississippi 39705, employs ALAN MANN, referred to in this Agreement as
Employee, of 13843 Highway 105 West, Suite 212, Conroe, Texas 77304, who accepts
employment on the following terms and conditions.
WHEREAS, Employer has, contemporaneously herewith, purchased all of the
assets of Diamondback Directional, Inc., ("Diamondback") pursuant to that
certain Asset Purchase Agreement dated effective as of September 1, 1997, (the
"APA"), between Employer and Diamondback; and
WHEREAS, as of the effective date of the APA, Employer has formed its
"Diamondback Directional Company" division to engage in the same business
previously undertaken by Diamondback Directional, Inc.; and
WHEREAS, the APA requires, as a condition to closing thereof, that Employee
enter into this Employment Agreement;
NOW, THEREFORE, in consideration of the premises, and to meet the
requirements of the APA that Employee enter this contract with Employer, and the
Mutual covenants hereinafter set forth, faithfully to be kept by the parties
hereto, the receipt and sufficiency of which consideration is acknowledged by
Employer and Employee; it is agreed as follows:
<PAGE>
ARTICLE 1
TERM OF EMPLOYMENT
1.01. By this Agreement, the Employer employs the Employee, and the
Employee accepts employment with the Employer, agreeing to remain in the employ
of Employer, for a period of five (5) years beginning on the 1st day of
September, 1997.
ARTICLE 2
COMPENSATION
Basic Compensation
2.01. As compensation for all services rendered under this Agreement, the
Employee shall be paid by the Employer a salary of $225,000.00 per year, payable
bi-monthly, in arrears.
ARTICLE 3
DUTIES OF EMPLOYEE
Duties
3.01. The Employee is employed as Vice President of Employer's Diamondback
Directional Company division, serving at the direction and control of the
President and officers of Employer. Employee shall live in Conroe, Texas, and
work in such areas as required to serve the best interests of Diamondback
Directional Company.
Extent of Services
3.02. Employee shall devote the whole of his time during business hours,
and at any other time when he is reasonably needed, for the benefit of the
Employer in its Directional Drilling Business. The Employee shall use his best
efforts to promote the interest and welfare of the Employer at all times.
3.03. Any outside employment, consulting or any other active commercial
business activity of any kind is strictly forbidden without written permission
of the President of the Employer and shall be grounds for immediate termination;
provided that Employee's continued partial ownership of one "hot-shot" truck and
a small passive interest in a production company which owns oil and/or gas
wells, shall not be considered a violation of this provision.
2
<PAGE>
ARTICLE 4
NON-COMPETITION IN DIRECTIONAL DRILLING BUSINESS
4.01. The Employee agrees that for and during the duration of his
employment, and for two years after termination of employment (the "Non-Compete
Term), he will not directly or indirectly become employed by or associated with,
in any capacity, any other person, firm or corporation which operates a
Directional Drilling Business in the States of Texas, Louisiana, New Mexico,
Wyoming, Colorado, Montana, Oklahoma, Alabama, North Dakota, South Dakota and
Mississippi (the "Non-Compete Area"), which area is deemed reasonable by the
parties considering that the Employer and Diamondback Directional, Inc., have
entered into, contemporaneously herewith, the APA, and also desire to comply
with the Texas Covenant Not to Compete Act, and further considering the prior
and anticipated business plan of the Employer, including, without limitation,
the prior business area of Diamondback Directional, Inc., and the plan for
Employee to be exposed to Employer's offices, facilities, customer base and
trade secrets in the Non-Compete Area, and the plan for Diamondback Directional
Company to expand into one or more parts of the Non-Compete Area.
4.02. It is agreed by the parties hereto that, in the event of any breach
on the non-competition provisions of Section 4.01 hereof, legal remedies
available to the Employer would be inadequate. Therefore, in the event of such
breach, the Employer is specifically authorized to apply to a court of competent
jurisdiction to enjoin any violation of such provision.
ARTICLE 5
EMPLOYEE BENEFITS AND BONUSES
5.01. The Employer agrees that the Employee will be entitled to the same
benefits package as like Employees of Employer.
Medical and Dental Benefits
5.02. Pursuant to Employer's company group plan, the Employer agrees to
include the Employee in the hospital, surgical, medical and dental benefit plan
adopted by the Employer from time to time.
Group Life Insurance
5.03. Pursuant to Employer's company group plan, the Employer agrees to
include the Employee under the group term life insurance policy adopted by
Employer from time to time.
ARTICLE 6
REIMBURSEMENT OF EXPENSES INCURRED BY EMPLOYEE
Business Expenses
6.01. In accord with Employer's standard practices, the Employee is
authorized to incur reasonable business expenses for promoting the business of
the Employer, some of which must be approved in advance by Employer. The
reasonable business expense may include expenditures for entertainment and
travel. Reimbursement will be in accord with Employer's standard practices.
3
<PAGE>
ARTICLE 7
TERMINATION
7.01. Employee's employment may be terminated by Employer upon the
occurrence of any of the following events:
(a) At the end of the fifth year of employment hereunder,
unless extended by mutual agreement of the parties; or
(b) Upon any material breach of the employment
relationship, including the failure of Employee to
perform his duties, as reasonably directed by Employer;
or
(c) Upon the death or disability of the Employee; or
(d) Conviction in a court of law of any felony or offense
involving Employer's property or business.
(e) Violation of any part of the Employer's standard
policies and procedures, drug and alcohol policy or any
policy letters which may be issued from time to time.
ARTICLE 8
GENERAL PROVISIONS
8.01. All notices or other communications required under this Agreement may
be effected either by personal delivery in writing, fax or by certified mail,
return receipt requested. Notice shall be deemed to have been given when
delivered or mailed to the parties at their respective addresses as set forth
above or when mailed to the last address provided in writing to the other party
by the addressee.
The current address of Employer is:
c/o Black Warrior Wireline Corp.
3748 Highway 45, North
Columbus, Mississippi 39701
Attn: William L. Jenkins
The current address of Employee is:
Alan Mann
13843 Highway 105 West, Suite 212
Conroe, Texas 77304
Any party may change the address to which notices are to be delivered to
such party, by notice given in accordance with this subparagraph to the other
party.
Amendments
8.02. This Agreement shall not be modified or amended except by a writing
signed by both parties.
Applicable Law, Enforceability
8.03. This Agreement shall be construed and enforced in accordance with the
laws of the State of Texas. The parties have carefully considered the
Non-Compete Area and the Non-Compete Term, and believe both to be reasonable.
However, should it be determined that the non-compete provisions of this
Employment Agreement is unenforceable due to the extent of the Non-Compete Area
or the duration of the Non-Compete Term, then this Employment Agreement shall be
deemed to be amended, and construed, as covering a revised Non-Compete Area, and
as being for a revised Non-Compete Term, which is reasonable and enforceable.
4
<PAGE>
Captions
8.04. The captions or headings in this Agreement are made for convenience
and general reference only and shall not be construed to describe, define or
limit the scope or intent of the provisions of this Agreement.
Assignment
8.05. Neither this Agreement, nor any right, interest or obligation
hereunder, may be assigned by either of the parties hereto without the prior
written consent of the other party, except that Employer may assign this
Agreement, in whole or in part, to its subsidiary Boone Wireline Co., Inc.,
provided that no such assignment shall relieve Employer of any obligations
created hereunder.
Entirety of Agreement, Counterpart Signatures
8.06. This Agreement supersedes all other agreements, either oral or in
writing, between the parties to this Agreement, with respect to the employment
of the Employee by the Employer. This Agreement contains the entire
understanding of the parties and all of the covenants and agreements between the
parties with respect to such employment.
8.07. This document may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Employer by and through its duly authorized
officers and the Employee have caused this instrument to be executed under seal
effective the day of September, 1997.
BLACK WARRIOR WIRELINE CORP.
WITNESS:
BY:
William L. Jenkins, President
WITNESS:
ALAN MANN
5
EMPLOYMENT AGREEMENT
WITH NON-COMPETITION AGREEMENT
COVERING THE DIRECTIONAL DRILLING BUSINESS
By this Agreement, BLACK WARRIOR WIRELINE CORP., a Delaware corporation,
referred to in this Agreement as Employer, located at 3748 Highway 45, North,
Columbus, Mississippi 39705, employs MICHAEL DALE JOWERS, referred to in this
Agreement as Employee, of 13843 Highway 105 West, Suite 212, Conroe, Texas
77304, who accepts employment on the following terms and conditions.
WHEREAS, Employer has, contemporaneously herewith, purchased all of the
assets of Diamondback Directional, Inc., ("Diamondback") pursuant to that
certain Asset Purchase Agreement dated effective as of September 1, 1997, (the
"APA"), between Employer and Diamondback; and
WHEREAS, as of the effective date of the APA, Employer has formed its
"Diamondback Directional Company" division to engage in the same business
previously undertaken by Diamondback Directional, Inc.; and
WHEREAS, the APA requires, as a condition to closing thereof, that Employee
enter into this Employment Agreement;"
NOW, THEREFORE, in consideration of the premises, and to meet the
requirements of the APA that Employee enter this contract with Employer, and the
Mutual covenants hereinafter set forth, faithfully to be kept by the parties
hereto, the receipt and sufficiency of which consideration is acknowledged by
Employer and Employee; it is agreed as follows:
<PAGE>
ARTICLE 1
TERM OF EMPLOYMENT
1.01. By this Agreement, the Employer employs the Employee, and the
Employee accepts employment with the Employer, agreeing to remain in the employ
of Employer, for a period of five (5) years beginning on the 1st day of
September, 1997.
ARTICLE 2
COMPENSATION
Basic Compensation
2.01. As compensation for all services rendered under this Agreement, the
Employee shall be paid by the Employer a salary of $175,000.00 per year, payable
bi-monthly, in arrears.
ARTICLE 3
DUTIES OF EMPLOYEE
Duties
3.01. The Employee is employed as Sales Manager of Employer's Diamondback
Directional Company division, serving at the direction and control of the
President and officers of Employer. Employee shall live in Conroe, Texas, and
work in such areas as required to serve the best interests of Diamondback
Directional Company.
Extent of Services
3.02. Employee shall devote the whole of his time during business hours,
and at any other time when he is reasonably needed, for the benefit of the
Employer in its Directional Drilling Business. The Employee shall use his best
efforts to promote the interest and welfare of the Employer at all times.
3.03. Any outside employment, consulting or any other active commercial
business activity of any kind is strictly forbidden without written permission
of the President of the Employer and shall be grounds for immediate termination;
provided that Employee's continued ownership of a small passive interest is a
production company which owns oil and/or gas wells, shall not be considered a
violation of this provision.
2
<PAGE>
ARTICLE 4
NON-COMPETITION IN DIRECTIONAL DRILLING BUSINESS
4.01. The Employee agrees that for and during the duration of his
employment, and for two years after termination of employment (the "Non-Compete
Term), he will not directly or indirectly become employed by or associated with,
in any capacity, any other person, firm or corporation which operates a
Directional Drilling Business in the States of Texas, Louisiana, New Mexico,
Wyoming, Colorado, Montana, Oklahoma, Alabama, North Dakota, South Dakota and
Mississippi (the "Non-Compete Area"), which area is deemed reasonable by the
parties considering that the Employer and Diamondback Directional, Inc., have
entered into, contemporaneously herewith, the APA, and also desire to comply
with the Texas Covenant Not to Compete Act, and further considering the prior
and anticipated business plan of the Employer, including, without limitation,
the prior business area of Diamondback Directional, Inc., and the plan for
Employee to be exposed to Employer's offices, facilities, customer base and
trade secrets in the Non-Compete Area, and the plan for Diamondback Directional
Company to expand into one or more parts of the Non-Compete Area.
4.02. It is agreed by the parties hereto that, in the event of any breach
on the non-competition provisions of Section 4.01 hereof, legal remedies
available to the Employer would be inadequate. Therefore, in the event of such
breach, the Employer is specifically authorized to apply to a court of competent
jurisdiction to enjoin any violation of such provision.
ARTICLE 5
EMPLOYEE BENEFITS AND BONUSES
5.01. The Employer agrees that the Employee will be entitled to the same
benefits package as like Employees of Employer.
Medical and Dental Benefits
5.02. Pursuant to Employer's company group plan, the Employer agrees to
include the Employee in the hospital, surgical, medical and dental benefit plan
adopted by the Employer from time to time.
Group Life Insurance
5.03. Pursuant to Employer's company group plan, the Employer agrees to
include the Employee under the group term life insurance policy adopted by
Employer from time to time.
ARTICLE 6
REIMBURSEMENT OF EXPENSES INCURRED BY EMPLOYEE
Business Expenses
6.01. In accord with Employer's standard practices, the Employee is
authorized to incur reasonable business expenses for promoting the business of
the Employer, some of which must be approved in advance by Employer. The
reasonable business expense may include expenditures for entertainment and
travel. Reimbursement will be in accord with Employer's standard practices.
3
<PAGE>
ARTICLE 7
TERMINATION
7.01. Employee's employment may be terminated by Employer upon the
occurrence of any of the following events:
(a) At the end of the fifth year of employment hereunder,
unless extended by mutual agreement of the parties; or
(b) Upon any material breach of the employment
relationship, including the failure of Employee to
perform his duties, as reasonably directed by Employer;
or
(c) Upon the death or disability of the Employee; or
(d) Conviction in a court of law of any felony or offense
involving Employer's property or business.
(e) Violation of any part of the Employer's standard
policies and procedures, drug and alcohol policy or any
policy letters which may be issued from time to time.
ARTICLE 8
GENERAL PROVISIONS
8.01. All notices or other communications required under this Agreement may
be effected either by personal delivery in writing, fax or by certified mail,
return receipt requested. Notice shall be deemed to have been given when
delivered or mailed to the parties at their respective addresses as set forth
above or when mailed to the last address provided in writing to the other party
by the addressee.
The current address of Employer is:
c/o Black Warrior Wireline Corp.
3748 Highway 45, North
Columbus, Mississippi 39701
Attn: William L. Jenkins
The current address of Employee is:
Michael Dale Jowers
13843 Highway 105 West, Suite 212
Conroe, Texas 77304
Any party may change the address to which notices are to be delivered to
such party, by notice given in accordance with this subparagraph to the other
party.
4
<PAGE>
Amendments
8.02. This Agreement shall not be modified or amended except by a writing
signed by both parties.
Applicable Law, Enforceability
8.03. This Agreement shall be construed and enforced in accordance with the
laws of the State of Texas. The parties have carefully considered the
Non-Compete Area and the Non-Compete Term, and believe both to be reasonable.
However, should it be determined that the non-compete provisions of this
Employment Agreement is unenforceable due to the extent of the Non-Compete Area
or the duration of the Non-Compete Term, then this Employment Agreement shall be
deemed to be amended, and construed, as covering a revised Non-Compete Area, and
as being for a revised Non-Compete Term, which is reasonable and enforceable.
Captions
8.04. The captions or headings in this Agreement are made for convenience
and general reference only and shall not be construed to describe, define or
limit the scope or intent of the provisions of this Agreement.
Assignment
8.05. Neither this Agreement, nor any right, interest or obligation
hereunder, may be assigned by either of the parties hereto without the prior
written consent of the other party, except that Employer may assign this
Agreement, in whole or in part, to its subsidiary Boone Wireline Co., Inc.,
provided that no such assignment shall relieve Employer of any obligations
created hereunder.
Entirety of Agreement, Counterpart Signatures
8.06. This Agreement supersedes all other agreements, either oral or in
writing, between the parties to this Agreement, with respect to the employment
of the Employee by the Employer. This Agreement contains the entire
understanding of the parties and all of the covenants and agreements between the
parties with respect to such employment.
8.07. This document may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the Employer by and through its duly authorized
officers and the Employee have caused this instrument to be executed under seal
effective the day of September, 1997.
BLACK WARRIOR WIRELINE CORP.
WITNESS:
BY:
William L. Jenkins, President
WITNESS:
MICHAEL DALE JOWERS
6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Registration Rights Agreement") is
made October 10, 1997, by and between Black Warrior Wireline Corp., a Delaware
corporation (the "Company"), and Diamondback Directional, Inc., a Texas
corporation ("DDI").
WHEREAS, on the date hereof the Company and DDI are holding a closing (the
"Closing") pursuant to an Asset Purchase Agreement (the "P&S Agreement")
effective September 1, 1997 among the Company, DDI, Alan Mann and Michael Dale
Jowers; and
WHEREAS, pursuant to Section 2.5(a) of the P&S Agreement, the Company has
agreed to issue and sell to DDI and DDI has agreed to purchase 647,569 shares
(the "Shares") of the Common Stock, par value $0.0005 per share, of the Company
in payment of a portion of the Purchase Price (as defined in the P&S Agreement);
and
WHEREAS, the Company has agreed to grant to DDI certain rights to have the
Shares registered under the Securities Act of 1933, as amended, as provided
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
1.1 "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.2 "Holder" shall mean DDI or any Qualified Transferee.
<PAGE>
1.3 "Qualified Transferee" shall mean any stockholder of DDI as of the date
hereof to whom the Registrable Securities and the rights hereunder have been
transferred prior to the filing by the Company of a registration statement with
the Commission pursuant to Article II hereof.
1.4 "Registrable Securities" shall mean (i) the Shares; and (ii) any Common
Stock issued or issuable at any time or from time to time in respect of the
Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company until such Shares are registered pursuant to a
Registration Statement or the exemption from registration under Rule 144(k) (or
successor Rule) under the Securities Act is available with respect to the
Shares.
1.5 The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
1.6 "Registration Expenses" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Registration Rights Agreement, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
1.7 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.8 "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
DDI and, except as set forth above, all fees and disbursements of counsel for
DDI.
1.9 "Underwritten Public Offering" shall mean a public offering in which
Common Stock is offered and sold on a firm commitment basis through one or more
underwriters, all pursuant to an underwriting agreement between the Company and
such underwriters.
2
<PAGE>
ARTICLE II
REGISTRATION RIGHTS
2.1 Registration Rights.
2.2.1 Subject to the terms hereof, if: (i) at any time or from time to
time the Company shall determine to register any of its securities in an
Underwritten Public Offering (except for registration statements on Form S-8
relating to employee benefit plans); and (ii) DDI or any Qualified Transferee is
the beneficial owner of any Registrable Securities; then the Company will
promptly give to the Holders written notice thereof no less than ten (10) days
prior to the filing of any registration statement, and include in such
Underwritten Public Offering (and any related qualification under blue sky laws
or other compliance), such Registrable Securities as the Holders may request in
a writing delivered to the Company within five (5) days after the Holders'
receipt of the Company's written notice.
2.2.2 Notwithstanding any other provision of this Section, if the
managing underwriter of such Underwritten Public Offering concludes in its
reasonable judgment that the number of shares to be registered for selling
shareholders (including the Holders) would materially adversely affect such
offering, subject to the terms of any agreements which may grant to other
persons senior registration rights to which the Company is a party, the number
of Registrable Securities to be registered, together with the number of shares
of Common Stock or other securities held by other shareholders proposed to be
registered in such offering, shall be reduced on a pro rata basis based on the
number of Registrable Securities proposed to be sold by the Holders as compared
to the number of shares proposed to be sold by all shareholders. The Registrable
Securities so excluded by the managing underwriter shall be withdrawn from such
registration, and shall not be transferred in a public distribution prior to
ninety (90) days after the effective date of the registration statement relating
thereto, or such other shorter period of time as the managing underwriter may
require.
2.2.3 The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration whether or not the Holders have elected to include securities
in such registration.
2.2 Expenses of Registration. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the Holders
2.3 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the Holders advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense, the Company will:
2.3.1 Prepare and file with the Commission a registration statement with
respect to such securities and use its commercially reasonable efforts to cause
such registration statement to become and remain effective until the
distribution described in such registration statement has been completed;
2.3.2 Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as the Holders may reasonably request
in order to facilitate the public sale of the shares by the Holders, and
promptly furnish to the Holders notice of any stop-order or similar notice
issued by the Commission or any state agency charged with the regulation of
securities.
2.4 Certain Information. The Holders agree, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding the Holders, the Registrable Securities and the
distribution proposed by the Holders as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
2.5 Assignment. Neither this Agreement, nor any right, interest or
obligation hereunder, may be assigned by either of the parties without the prior
written consent of the other party; provided, however, that any assignment by
DDI to any Qualified Transferee shall not require the prior written consent of
the other party. The Company shall not be obligated to recognize any such
assignment by DDI to a Qualified Transferee unless and until the Company shall
have received written notice from DDI specifying the name and address of the
Qualified Transferee(s) and identifying the Registrable Securities with respect
to which such rights hereunder have been assigned.
3
<PAGE>
2.6 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware.
2.7 Entire Agreement; Amendment. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Holders.
2.8 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed:
If to DDI:
Diamondback Directional, Inc.
13843 Highway 105 West - Suite 212
Conroe, Texas 77304
or at such other address as DDI shall have furnished to the Company in writing;
If to any Qualified Transferee:
To such address as DDI shall have furnished the Company in
writing pursuant to Section 2.5.
If to the Company
Black Warrior Wireline Corp.
3748 Highway #45 North
Columbus, Mississippi 39701
Attention: William L. Jenkins, President
or a such other address as the Company shall have furnished to the Holders. Each
such notice or other communication shall, for all purposes of this Agreement, be
treated as effective upon receipt.
2.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
2.10 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
2.11 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the Company has executed this agreement effective upon
the date first set forth above.
BLACK WARRIOR WIRELINE CORP.
By:_________________________________
William L. Jenkins, President
DIAMONDBACK DIRECTIONAL, INC.
By:_________________________________
Alan Mann, President
4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE TRANSFER OF THIS NOTE IS SUBJECT TO RESTRICTIONS ON ITS
OFFER AND SALE UNTIL THE REGISTRATION REQUIREMENTS OF SUCH ACT HAVE
BEEN COMPLIED WITH OR AN EXEMPTION THEREFROM IS AVAILABLE AND THE MAKER
RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS NOTE UNTIL SUCH
REQUIREMENTS HAVE BEEN MET.
STATE OF TEXAS
COUNTY OF MONTGOMERY DATE: September ____, 1997
$3,000,000 PROMISSORY NOTE
DUE AUGUST 31, 1999
As set forth below, BLACK WARRIOR WIRELINE CORP, a Delaware corporation
("Maker") promises to pay to DIAMONDBACK DIRECTIONAL, INC. ("Payee"), the sum of
$3,000,000 in lawful money of the United States for value received payable at
13843 Highway 105 West, Suite 212, Conroe, Texas 77304, or any other address as
designated by the Payee, from time to time.
I.
DEFINITIONS
As used herein, the term "Agreement" shall mean that certain Asset Purchase
Agreement dated effective September 1, 1997 between Maker, as Purchaser, and
Payee, as Seller, relating to Maker's acquisition of Seller's assets.
II.
PAYMENT TERMS
This note is subject to the terms of the Agreement, including the terms
thereof relating to adjustment of the principal balance hereof. This note shall
be due and payable on August 31, 1999 or on the date that William L. Jenkins
ceases to be President of Maker or on the date that William L. Jenkins ceases to
be a shareholder of Maker, whichever occurs first.
III.
INTEREST
This Note shall bear interest at the rate of six and one-half percent
(6.5%) per annum from September 1, 1997 until paid in full, on the unpaid
balance. Interest shall be due and payable quarterly, beginning January 2, 1998,
and continuing on the second day of April, July October and January thereafter,
until paid in full. In the event Maker fails to pay any interest or principal
when due hereunder, the rate of interest on the amount past due shall be
increased to eleven percent (11%).
IV.
RIGHT OF PAYMENT
This Note may be prepaid, in whole or in part, at any time without penalty.
V.
DEFINITION OF AN EVENT OF DEFAULT
The following shall constitute and event of default: failure to pay when
due any installment of principal or interest of this Note; the issuance of an
writ of garnishment or writ of attachment as to any property of Maker, which
writ of garnishment or attachment is not cured within thirty (30) days after its
issuance.
<PAGE>
VI.
COLLECTION, WAIVER, ETC
In the event of any Default, then Payee may, if such default is not cured
within ten (10) days after receipt of written notice thereof from Payee, and
without further notice, declare the unpaid principal balance hereof, together
with earned and unpaid interest, immediately due and payable.
Each maker, indorser, and guarantor or other surety of this Note does
hereby waive demand, grace, presentment for payment, and protest, and further
does hereby agree and consent that this Note may be renewed, and the time for
payment extended without notice, and without releasing any of the parties.
In the event of any default by any party as to any duty, warranty or
undertaking owed to another party, which default results in efforts by the
non-defaulting party to remedy same (whether a lawsuit is filed or not), the
defaulting party shall pay, in addition to such other sums as may be due, all
costs and expenses of such efforts, including, but not limited to, a reasonable
attorney's fee.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
BLACK WARRIOR WIRELINE CORP
BY: William L. Jenkins
ITS: President
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS
ON THEIR OFFER AND SALE UNTIL THE REGISTRATION REQUIREMENTS OF SUCH ACT
HAVE BEEN COMPLIED WITH OR AN EXEMPTION THEREFROM IS AVAILABLE AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES
UNTIL SUCH REQUIREMENTS HAVE BEEN MET.
STATE OF TEXAS
COUNTY OF MONTGOMERY DATE: September ____, 1997
PROMISSORY NOTE FOR NET RECEIVABLES
DUE AUGUST 31, 1999
As set forth below, BLACK WARRIOR WIRELINE CORP, a Delaware corporation
("Maker") promises to pay to DIAMONDBACK DIRECTIONAL, INC. ("Payees"), the sum
of $341,096 in lawful money of the United States for value received payable at
13843 Highway 105 West, Suite 212, Conroe, Texas 77304 or any other address as
designated by the Payees, from time to time.
I.
DEFINITIONS
As used herein, the term "Agreement" shall mean that certain Asset Purchase
Agreement dated effective September 1, 1997 between Maker, as Purchaser, and
Payee, as Seller, relating to Maker's acquisition of Seller's assets.
II.
PAYMENT TERMS
This note is subject to the terms of the Agreement, including the terms
thereof relating to adjustment of the principal balance hereof. This note shall
be due and payable on August 31, 1999 or on the date that William L. Jenkins
ceases to be President of Maker or on the date that William L. Jenkins ceases to
be a shareholder of Maker, whichever occurs first.
III.
INTEREST
This Note shall bear interest at the rate of six and one-half percent
(6.5%) per annum from September 1, 1997 until paid in full, on the unpaid
balance. Interest shall be due and payable quarterly, beginning January 2, 1998,
and continuing on the second day of April, July, October and January thereafter,
until paid in full. In the event Maker fails to pay any interest or principal
when due hereunder, the rate of interest on the amount past due shall be
increased to eleven percent (11%).
IV.
RIGHT OF PAYMENT
This Note may be prepaid, in whole or in part, at any time without penalty.
V.
DEFINITION OF AN EVENT OF DEFAULT
The following shall constitute and event of default: failure to pay when
due any installment of principal or interest of this Note; the issuance of an
writ of garnishment or writ of attachment as to any property of Maker, which
writ of garnishment or attachment is not cured within thirty (30) days after its
issuance.
<PAGE>
VI.
COLLECTION, WAIVER, ETC
In the event of any Default, then Payee may, if such default is not cured
within ten (10) days after receipt of written notice thereof from Payee, and
without further notice, declare the unpaid principal balance hereof, together
with earned and unpaid interest, immediately due and payable.
Each maker, indorser, and guarantor or other surety of this Note does
hereby waive demand, grace, presentment for payment, and protest, and further
does hereby agree and consent that this Note may be renewed, and the time for
payment extended without notice, and without releasing any of the parties.
In the event of any default by any party as to any duty, warranty or
undertaking owed to another party, which default results in efforts by the
non-defaulting party to remedy same (whether a lawsuit is filed or not), the
defaulting party shall pay, in addition to such other sums as may be due, all
costs and expenses of such efforts, including, but not limited to, a reasonable
attorney's fee.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
BLACK WARRIOR WIRELINE CORP
BY: William L. Jenkins
ITS: President
AGREEMENT FOR PURCHASE AND SALE
This Agreement for Purchase and Sale (the "Agreement"), is made and entered
as of October 9, 1997, by and between Black Warrior Wireline Corp., a Delaware
corporation ("Black Warrior"), and St. James Capital Partners, L.P., a Delaware
limited partnership ("Purchaser"), and sets forth the terms and conditions of
the sale and purchase of a $2,900,000 7% Convertible Promissory Note,
substantially in the form attached hereto as Exhibit A (the "Note"). For
purposes of this Agreement, the term "Seller" is defined to mean Black Warrior
and the Active Subsidiary (defined in Section 2.8 below).
WHEREAS, Seller and Purchaser are parties to that certain agreement in
principal relating to the transaction, which agreement was executed by Seller
and Purchaser on September 10, 1997, setting forth the agreement of the parties
regarding the major terms of the transaction, which the parties desire to
further formalize and record by this Agreement.
WHEREAS, Seller desires to issue and sell to Purchaser, and Purchaser
desires to purchase and accept from Seller, the Note in the form of Exhibit A,
on the terms and subject to the conditions set forth herein.
WHEREAS, the obligations of Seller under the Note are secured by that
certain Borrower Security Agreement dated as of June 5, 1997, between Seller and
Purchaser, which is hereby amended and modified pursuant to that certain
Amendment and Ratification of Borrower Security Agreement substantially in the
form attached hereto as Exhibit B-1 (the "Amendment of Borrower Security
Agreement"), by that certain Subsidiary Security Agreement (herein so called)
dated as of June 5, 1997, between the subsidiaries of Black Warrior and
Purchaser, which is hereby amended and modified pursuant to that certain
Amendment and Ratification of Subsidiary Security Agreement, substantially in
the form attached hereto as Exhibit B-2 (the "Amendment of Subsidiary Security
Agreement"), and are guaranteed by that certain Subsidiary Guaranty dated as of
June 5, 1997, by the subsidiaries of Black Warrior in favor of Purchaser, which
is amended and modified pursuant to that certain Amendment and Ratification of
Subsidiary Guaranty substantially in the form attached hereto as Exhibit B-3
(the "Amendment of Subsidiary Guaranty").
WHEREAS, Seller and Purchaser desire to make certain representations,
warranties and agreements in connection with the purchase and sale of the Note
contemplated hereby.
<PAGE>
WHEREAS, Seller desires to sell to Purchaser warrants ("Warrants") to
purchase 725,000 shares of Seller's Common Stock, par value $0.0005 per share
(the "Common Stock"), which Warrants shall have the terms and be subject to the
conditions set forth in the form of Warrants attached hereto as Exhibit C.
WHEREAS, Seller desires to grant to Purchaser certain registration rights
in respect of the shares of Seller's Common Stock that may be acquired on
conversion of the Note and on the exercise of the Warrants, which registration
rights shall have the terms and be subject to the conditions set forth in the
Registration Rights Agreement dated as of June 5, 1997, as amended and modified
by that certain Amendment No. 1 to Registration Rights Agreement substantially
in the form attached hereto as Exhibit D (the "Amendment to Registration Rights
Agreement").
WHEREAS, this Agreement, the Note, the Amendment to Security Agreement, the
Amendment to Subsidiary Security Agreement, the Amendment to Subsidiary
Guaranty, the Warrants, and the Amendment to Registration Rights Agreement are
collectively referred to herein as the "Transaction Documents".
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of the Note and the Warrants. Subject to the terms of
this Agreement, Seller agrees to and does hereby issue, sell and deliver the
Note and the Warrants to Purchaser at the Closing (as defined herein), and
Purchaser agrees to and does hereby purchase and accept the Note and the
Warrants from Seller.
1.2 Consideration for Purchase of the Note. Subject to the terms of this
Agreement, Purchaser hereby agrees to pay to Seller, by check or wire transfer
to the account of Seller, $2,900,000, as the consideration for the purchase of
the Note (the "Note Consideration"). It is the intention of the parties that the
Note Consideration shall be advanced in multiple advances, with $2,900,000 being
paid at the time of the closing of Seller's acquisition of Diamondback
Directional, Inc. Interest under the Note shall accrue on amounts actually
advanced.
1.3 Consideration for Purchase of the Warrants. Subject to the terms of
this Agreement, Purchaser hereby agrees to pay to Seller at Closing, by check or
wire transfer to the account of Black Warrior, $36,250 (or $0.05 per share
subject to the Warrants) as the consideration for the purchase of the Warrants
(the "Warrant Consideration"; the Note Consideration and the Warrant
Consideration are collectively referred to herein as the "Consideration").
1.4 Origination Fee. Seller agrees to pay Purchaser at Closing a one-time
origination fee in the amount of $36,250 (the "Origination Fee") for the payment
of the Note Consideration.
1.5 Subordination to Future Financing. Purchaser agrees to enter into
subordination agreements with senior secured lenders that provide financing to
Seller in an amount not to exceed $4,500,000 with respect to a term loan and
$3,000,000 with respect to a revolving credit facility (in this section, the
"Senior Lenders"), pursuant to which Purchaser would subordinate its security
interests and rights to the indebtedness and security interests of the Senior
Lenders. Such subordination agreements shall be on terms and conditions
acceptable to all parties (including Purchaser, which agrees to negotiate in
good faith with respect to the subordination agreement) at the time they are
entered into. Such subordination agreements shall not obligate Purchaser to
"stand still" for a period of time longer than 120 days after a default by
Seller in its obligations to the Senior Lender(s).
2
<PAGE>
1.6 Future Financings. If Seller, at any time so long as the Note is
outstanding, intends to issue or sell any shares of capital stock, debt
securities or securities convertible into, exchangeable for or exercisable for
shares of capital stock or debt securities (a "Financing"), Seller shall give
Purchaser written notice (the "Offer") of its intent to engage in a Financing,
specifying its basic terms and conditions. If Purchaser gives notice to Seller,
specifying Purchaser's basic terms and conditions, of its intent to provide
Financing on a basis materially similar to the proposal set forth in the Offer
within five (5) business days after receipt of the Offer (a "Financing Notice"),
then Seller shall be obligated to consummate the Financing only with Purchaser
and Purchaser shall be obligated to provide the financing at the time committed
by the third party whose commitment gave rise to the Offer. If Purchaser does
not within five (5) business days after receipt of the Offer give to Seller a
Financing Notice, Purchaser shall be deemed to have waived its rights to provide
the Financing under this Section, and Seller may thereafter obtain such
Financing from a third party or parties if such third party Financing is on the
same basic terms and conditions as those set forth in the Offer. Any proposed
Financing on terms materially different from those basic terms and conditions in
the Offer deemed waived by Purchaser shall require a new Offer and compliance by
Seller with the provisions of this Section. Notwithstanding the foregoing,
Seller shall not be required to comply with this Section in connection with: (i)
the issuance and sale of Common Stock or convertible securities in connection
with any employee stock option plan, arrangement or agreement now or hereafter
in effect; (ii) the issuance of capital stock of Seller upon exercise of the
Warrants or otherwise issued to Purchaser or its assigns; (iii) the issuance of
capital stock upon exercise of any stock purchase warrant or option (other than
the options referred to in clause (i) above) or other convertible security
outstanding on the date hereof or hereafter issued; (iv) a public offering of
securities; (v) any loan from a regular commercial lending source; or (vi) any
securities issued with the favorable vote of Purchaser's designee as a director
of the Seller.
1.7 Other Permitted Debt. Seller shall be permitted to incur indebtedness
for borrowed money for the purchase or financing of equipment in the ordinary
course of business, in an amount not to exceed $2,500,000.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that each of the following
statements (i) are true and correct on the date hereof and (ii) will be true and
correct in all material respects on the date each advance of the Note
Consideration is made:
2.1 Organization, Standing and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted. Seller is licensed and qualified to do business as a foreign
corporation in each jurisdiction in which the character of Seller's properties,
owned or leased, or the nature of its activities makes such qualification or
license necessary.
3
<PAGE>
2.2 Authority; No Defaults. Seller has all requisite corporate power and
authority to enter into the Transaction Documents and to consummate the
transactions contemplated thereby. The execution and delivery of the Transaction
Documents and the consummation of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of Seller.
The Transaction Documents have been executed and delivered by Seller and
constitute the valid and binding obligation of Seller, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law). The execution and delivery of the Transaction Documents do
not, and the consummation of the transactions contemplated hereby and thereby
will not, conflict with or result in a breach of or the acceleration of any
obligation under, or constitute a default or event of default (or event which,
with notice or lapse of time or both, would constitute a default or event of
default) under, any provision of any charter, bylaw, indenture, mortgage, lien,
lease, agreement, contract, instrument, order, judgment, decree, ordinance or
regulation, or any restriction to which any property of Seller is subject or by
which Seller is bound, the effect of which would be materially adverse to
Seller. Seller is not, nor does Seller have knowledge that it is alleged to be,
in material violation or default of any applicable law, statute, order, rule or
regulation promulgated or judgment entered by any court, administrative agency
or commission or other governmental agency or instrumentality, domestic or
foreign (a "Governmental Entity"), relating to or affecting the operation,
conduct or ownership of the property or business of Seller.
2.3 Approvals. There is no legal impediment to the execution and delivery
of the Transaction Documents by Seller or to the consummation of the
transactions contemplated thereby, and no filing or registration with, or
authorization, consent or approval of, a Governmental Entity, shareholders or
any other third party is necessary for the consummation by Seller of the
transactions contemplated thereby.
2.4 Charter and Bylaws. Seller has furnished to Purchaser true and complete
copies of its charter and bylaws, each as amended to date and as presently in
effect.
2.5 SEC Documents. (a) Seller has made all filings with the Securities and
Exchange Commission ("SEC") that it has been required to make under the
Securities Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") since December 31, 1994.
Seller has provided to Purchaser true, complete and correct copies of Seller's
annual report on Form 10-K ("Seller's Form 10-K") for the fiscal year ended
December 31, 1996, together with all amendments thereto, Seller's quarterly
report on Form 10-Q for the fiscal quarters ended March 31, 1997 and June 30,
1997, together with all amendments thereto, and any and all filings with the SEC
made by Seller (including all requested exhibits to such filings) since the
filing of said Form 10-K (all such documents that have been filed with the SEC,
as amended, are referred to as the "Seller SEC Documents"). As of their
respective dates, and except as amended, Seller SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and none of Seller SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4
<PAGE>
(b) The financial statements of Seller included in Seller SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q) and fairly present (subject, in
the case of the unaudited statements, to normal recurring audit adjustments) the
consolidated financial position of Seller as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended. Since June 30, 1997, (i) there have been no material adverse changes in
Seller's business, operations or financial condition and (ii) Seller's
operations have been conducted in the ordinary course of business except as
disclosed in writing to Purchaser.
2.6 Litigation. Except as set forth on Schedule 2.6, as of the date of this
Agreement, there is no suit, action, proceeding or investigation pending or, to
the best knowledge of Seller, threatened against or affecting Seller, nor is
there any outstanding judgment, order, writ, injunction or decree against
Seller, which judgment would have a material adverse effect on Seller. Seller is
not subject to any court order, writ, injunction, decree, settlement agreement
or judgment that contains or orders any on-going obligations, whether
prohibitory or mandatory in nature, the performance of which would have a
material adverse effect on Seller.
2.7 Capitalization. Black Warrior has authorized capital stock of
12,500,000 shares of Common Stock of which, as of the date hereof, there are
2,250,216 shares issued and outstanding. All of the issued and outstanding
shares of Common Stock were duly and validly issued and are fully paid and
non-assessable. None of the outstanding shares of Common Stock has been issued
in violation of any preemptive rights of the current or past stockholders of
Seller. As of the date hereof, Black Warrior has reserved for issuance (i) an
aggregate of 653,750 shares of Common Stock issuable on issuance of stock
options to employees, officers, directors and other persons and (ii) an
aggregate of 1,202,750 shares of Common Stock issuable on exercise outstanding
warrants, options, or of convertible securities other than those listed in (i)
above. Except as set forth on Schedule 2.7 or described above in (i) and (ii),
there are no outstanding options, warrants or rights to subscribe for, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of Black
Warrior or contracts, commitments, understandings or arrangements by which Black
Warrior is or may be obligated to issue additional shares of its capital stock
or options, warrants, or rights to purchase or acquire any additional shares of
its capital stock. All of the Common Stock issued on the exercise of the
Warrants will be fully paid, non-assessable and free and clear of any
Encumbrances. As used in this Agreement, the term "Encumbrance" means and
includes (i) any security interest, mortgage, deed of trust, lien, charge,
pledge, proxy, adverse claim, equity, power of attorney, or restriction of any
kind, including but not limited to, any restriction or servitude on the use,
transfer, receipt of income, or other exercise of any attributes of ownership,
and (ii) any Uniform Commercial Code financing statement or other public filing,
notice or record that by its terms purports to evidence or notify interested
parties of any of the matters referred to in clause (i) that has not been
terminated or released by another proper public filing, notice or record.
2.8 Subsidiaries. Schedule 2.8 sets forth the only active subsidiary of
Seller, including state or country of organization and address of its principal
executive offices ("Active Subsidiary"). For purposes of this Agreement and the
other agreements contemplated hereby, the Active Subsidiary is the only
"subsidiary" of Seller. Schedule 2.8 also discloses four inactive corporations
and/or limited partnerships owned by Seller (the ("Inactive Organizations"), all
four of which are at this time inactive, defunct, and have no value. No
representation, warranty, financial standard or other provision of this
Agreement, or any agreement contemplated hereby, shall be deemed violated by
virtue of the fact that any of the Inactive Organizations do not meet said
representation, warranty, financial standard or other provision. However, if any
Inactive Organization begins to conduct any business (other than activities to
"wind down" such organization) such Inactive Organization shall be considered an
Active Subsidiary (and cease to be an Inactive Organization) from that point
forward. The Active Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, has
all requisite corporate power and authority to own, to lease or to operate its
properties and to carry on its business as it is now being conducted and is duly
qualified or licensed to do business in each jurisdiction in which the character
of its properties, owned or leased, or the nature of its activities makes such
qualification or license necessary, unless the failure to be so licensed or
qualified would not have a material, adverse effect on Seller. Except as set
forth in Schedule 2.8, all outstanding shares of capital stock of the Active
Subsidiary were duly and validly issued and are fully paid, nonassessable and
owned by Seller or a subsidiary of Seller, free and clear of all Encumbrances.
There are no options, warrants or other rights, agreements or commitments
(including preemptive rights) obligating Seller or the Active Subsidiary to
issue, to sell or to transfer any shares of capital stock or other securities of
the Active Subsidiary. There are 151 shares of capital stock of Active
Subsidiary issued and outstanding, all of which has been pledged to Purchaser.
5
<PAGE>
2.9 Liabilities. Except as set forth in Schedule 2.9, Seller has no
liabilities or obligations, either accrued, absolute, contingent, or otherwise
that have a material adverse effect on the value or business of Seller, and
Seller has no knowledge of any potential liability that it reasonably believes
would likely result in a material adverse effect on the value or business of
Seller, other than those (a) reflected or reserved against in the balance sheets
reported on Seller's Form 10-Q for the fiscal quarter ended June 30, 1997, or
(b) incurred in the ordinary course of business since June 30, 1997.
2.10 Licenses, Permits, Authorizations, Etc. Seller holds all approvals,
authorizations, consents, licenses, orders, franchises, rights, registrations
and permits of any type required to operate its business as presently conducted.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any revocation,
cancellation, suspension or modification of any such approval, authorization,
consent license, order, franchise, right, registration or permit.
2.11 Title to Assets; Encumbrances. Except as set forth in Schedule 2.11:
(a) Seller has good and indefeasible title to its assets, whether
real, personal or intangible, free and clear of all Encumbrances except (i)
liens for current taxes and assessments not yet due or being contested in
good faith by appropriate proceedings, (ii) mechanic's liens arising under
the operation of law for actions contested in good faith or for which
payment arrangements have been made, (iii) liens granted or incurred by
Seller in the ordinary course of its business or financing of equipment,
office space, furniture and computers in the ordinary course of its
business, and (iv) easements, rights of way, encroachments or other
restrictions or matters affecting title which do not prevent the assets
from being used for the purpose for which they are currently being used;
(b) There are no parties in possession of any of the assets of Seller
other than personal property held by third parties in the reasonable and
ordinary course of business. Seller enjoys full, free and exclusive use and
quiet enjoyment of its assets and its rights pertaining thereto. Seller
enjoys peaceful and undisturbed possession under all leases under which it
is a lessee, and all such leases are legal, valid and binding obligations
of Seller, enforceable against Seller in accordance with its terms.
2.12 Taxes and Returns. Seller has filed all required tax returns and
reports. Seller has paid all taxes, assessments and governmental charges and
penalties which it has incurred, except such as are being or may be contested in
good faith by appropriate proceedings. Seller is not delinquent in the payment
of any tax, assessment or governmental charge. No deficiencies for any taxes
have been proposed, asserted, or assessed against Seller, and no requests for
waivers of the time to assess any such tax are pending. For the purposes of this
Agreement, the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts.
6
<PAGE>
2.13 Insurance. Each policy of property, fire and casualty, product
liability, worker's compensation, professional liability and title insurance and
other forms of insurance (except group, health and life policies) and each bond
issued or posted by any person with respect to any operations or other
activities of Seller is, to the knowledge of Seller, the legal, valid and
binding obligation of the insurer or bond issuer, enforceable in accordance with
its terms, and is in an amount and provides for coverage as is customary in the
ordinary business practices of Seller's industry.
2.14 Patents, Trademarks, Etc. Seller has no patents, trademarks, service
marks, works of authorship, tradenames, brandnames or copyrights. Seller is not
using, and does not have any plan to manufacture, use or sell anything which
would violate or infringe on any patent or proprietary right (of which Seller is
aware) of any other person, firm or corporation or which would require a license
under any such patent or proprietary right. Seller has not received any
communications alleging that Seller has violated or, by conducting its business
as proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, works of authorship or trade secrets or other
proprietary rights in processes of any other person or entity.
2.15 Material Contracts and Obligations. Attached hereto as Schedule 2.15
is a list of all material agreements of any nature to which Seller is a party or
by which it or any of its properties is bound, including without limitation, the
Master Service Agreement with the ten top customers (based on dollar volume) of
Seller, all employment and consulting agreements, loan agreements, leases,
purchase contracts, employee benefit, bonus, pension, stock option, stock
purchase and similar plans and arrangements, and distributor and sales
representative agreements. True and complete copies of such written agreements
have been provided to Purchaser. All such agreements and contracts are valid,
binding and in full force and effect. Seller is not in default on any of the
agreements listed on Schedule 2.15.
2.16 Compliance. Except as set forth on Schedule 2.16 Seller has complied
in all material respects with all laws, and is not in violation of any charter
or other corporate restrictions or any law, ordinance, requirement, regulation,
judgment, injunction, award, decree, or other order applicable to its business.
There is no term or provision of any mortgage, indenture, contract, agreement or
instrument to which Seller is a party or by which it is bound, any provision of
any state or federal judgment, decree, order, injunction, writ, statute, rule or
regulation applicable to or binding upon Seller, which materially adversely
affects or, in the future is reasonably likely to affect materially and
adversely the business, prospects, condition, affairs or operations of Seller or
any of its properties or assets. To the knowledge of Seller, no employee of
Seller is in violation of any term of any employment contract, patent or other
proprietary information disclosure agreement or any other contract or agreement
relating to the employment of such employee with Seller.
2.17 Employees. Seller has obtained employment agreements, some of which
contain nondisclosure and assignment of invention provisions and non-competition
provisions, with Seller from some employees and consultants of Seller whose
employment responsibility requires access to confidential and proprietary
information of Seller, in a form satisfactory to Purchaser. Seller has complied
in all material respects with all applicable and material state and federal laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours and other laws related to employment, and there are
no arrears in the payment of wages, or social security taxes.
7
<PAGE>
2.18 Transactions with Affiliates and Stockholders. Except as set forth on
Schedule 2.18, no stockholder, officer, director or employee of Seller, nor any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), is presently a
party to any transaction with Seller, including without limitation, any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to, any such person or entity.
2.19 Use of Proceeds. Seller will not use the Consideration, except to (i)
fund Seller's acquisition of the assets of Diamondback Directional, Inc., a
Texas corporation (the "Acquisition"); and (ii) pay attorneys' fees and
transactional costs in connection with this Agreement and all agreements
contemplated hereby, as well as pursuant to that certain Agreement for Purchase
and Sale dated June 5, 1997. Seller shall not use the Consideration for any
other purpose without the prior consent of Purchaser.
2.20 Books and Records. The minute books of Seller furnished to counsel to
Purchaser for review contain complete and accurate records of all meetings and
other corporate actions of its stockholders and its Board of Directors and
committees thereof. The stock ledger and stock transfer records of Seller
furnished by Liberty Transfer Company to counsel to Purchaser for review is
complete and reflects all issuances, transfers of which Seller is aware,
repurchases and cancellations of shares of capital stock of Seller.
2.21 Stockholder Agreements. Except as set forth in Schedule 2.21 or as
contemplated by this Agreement, there are no agreements, written or oral, which
are (i) between Seller and any holder of its capital stock, or (ii) to the
knowledge of Seller, among any persons holding five percent (5%) or more of
Seller's capital stock, relating to the acquisition, disposition or voting of
the capital stock of Seller.
2.22 ERISA. Except as disclosed on Schedule 2.22, seller has no employee
benefit plans subject to the Employment Retirement Income Security Act of 1974.
2.23 Accounts Receivable. All accounts receivable of Seller (including
those reflected on the Balance Sheet or acquired on or prior to the Closing
Date) arose in the ordinary and usual course of business of Seller, represent
valid obligations due to Seller and have been collected or are, to Seller's best
knowledge, collectible in the ordinary and usual course of business of Seller in
the aggregate recorded amounts thereof in accordance with their terms less in
the case of accounts receivable reflected in the Financial Statements, all
allowance for doubtful accounts marked therein, and in the case of accounts
receivable thereafter, all allowances for doubtful accounts consistent with past
practices of Seller.
2.24 Hazardous Wastes and Substances. Neither the operations of Seller nor
the use of its assets violates any applicable federal, state or local law,
statute, ordinance, rule, regulation, memorandum of understanding, order or
notice requirement pertaining to the collection, transportation, storage,
treatment, discharge, release or disposal of hazardous or non-hazardous waste or
substances, including without limitation (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C, ss.ss.9601 et seq.),
as amended from time to time on or before the Closing Date ("CERCLA")
(including, without limitation, as amended pursuant to the Superfund Amendments
and Reauthorization Act of 1986), and such regulations promulgated under CERCLA
on or before the Closing Date, (ii) the Resources Conservation and Recovery Act
of 1976 (42 U.S C. ss.ss.6901 et seq.), as amended from time to time ("RCRA") on
or before the Closing Date, and such regulations promulgated under RCRA, (iii)
any applicable federal, state or local laws or regulations relating to the
environment in effect on the Closing Date (collectively, the "Applicable
Environmental Laws"). Except as disclosed on Schedule 2.24, none of the
operations of Seller has ever been conducted nor have any of its assets been
used in such a manner as to constitute a violation of any of the Applicable
Environmental Laws. No notice has been served on Seller by any person or
Governmental Entity regarding any existing, pending or threatened investigation
or inquiry related to violations under any Applicable Environmental Law, or
regarding any claims for corrective action, remedial obligations or contribution
for removal costs or damages under any Applicable Environmental Law, or
regarding the designation of Seller or any of its affiliates as a potentially
responsible party for any facility under the Applicable Environmental Laws, nor
does any fact or circumstance exist which, if disclosed publicly, would be
reasonably likely to result in the service on Seller of any such notice. There
has been no action taken, or omitted to be taken by Seller which has caused, or
would be reasonably likely to cause, a "release" of any "hazardous substance" at
any "facility," without limitation, within the meaning of such terms as defined
in the Applicable Environmental Laws.
8
<PAGE>
2.25 Disclosures. Neither this Agreement nor any Exhibit or Schedule
hereto, nor any certificate or other instrument furnished to Purchaser or its
counsel by Seller in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which they were made, not misleading.
ARTICLE III
COVENANTS
3.1 New Subsidiaries. Seller agrees that (i) any Inactive Organization
which becomes an Active Subsidiary after the execution of this Agreement and
(ii) any other entity of which Seller obtains control (directly or indirectly)
of more than 50% of the outstanding voting stock or equity interests shall
execute a written agreement to be bound by that certain Subsidiary Security
Agreements, dated as of even date herewith, before the events set forth in (i)
or (ii) above have occurred.
3.2 Additional Security Interests. Seller agrees that if any Inactive
Organization begins to conduct any business Seller shall pledge all of its
interest in such Inactive Organization to secure the Notes by (i) executing a
security agreement substantially in the form of that certain Borrower Security
Agreement, dated as of even date herewith and (ii) delivering all certificates
representing the shares of stock being pledged, before such Inactive
Organization commences doing business.
3.3 Conversion of Note; Registration of Securities. The parties hereto
recognize and acknowledge that Purchaser previously purchased from Seller that
certain $2,000,000 9% Convertible Promissory Note dated June 5, 1997 (the
"Original Convertible Note"). Purchaser hereby covenants and agrees to promptly
convert the Original Convertible Note pursuant to its terms, but only if and
when (i) Seller has filed, within 60 days of the date hereof, a registration
statement covering the shares of Common Stock issuable upon (a) conversion of
the Original Convertible Note, (b) exercise of the Warrants dated as of June 5,
1997, to purchase 546,000 and 120,000 shares of Common stock, respectively, (c)
conversion of the Note and (d) exercise of the Warrants and (ii) such
registration statement has been declared effective by the Securities and
Exchange Commission.
ARTICLE IV
THE CLOSING
4.1 Time and Place. Subject to the provisions of Section 1.2 herein, the
closing of the purchase and sale of the Note and the Warrants (the "Closing")
will take place on a date agreed to by the parties (the "Closing Date"), at the
offices of Gardere Wynne Sewell & Riggs, L.L.P., unless another time and place
are agreed to by the parties.
4.2 Conditions to the Obligation of Seller. The obligation of Seller to
effect the Closing is subject to Purchaser delivering, or causing to be
delivered, to Seller at the Closing the Consideration.
4.3 Conditions to the Obligation of Purchaser. The obligation of Purchaser
to effect the Closing is subject to satisfactory completion of the Acquisition
and payment by Seller of the Origination Fee. The obligation of Purchaser is
further subject to Seller delivering, or causing to be delivered, to Purchaser
at the Closing the following documents:
9
<PAGE>
4.3.1 copies, certified by the Secretary of State of Delaware as of May
27, 1997, of the charter of Black Warrior and all amendments thereto and a
certificate of an Officer of Black Warrior certifying that there have been no
amendments to such charter since May 27, 1997, and copies, certified by the
Secretary of Active Subsidiary as of the Closing Date, of the charter of Active
Subsidiary and all amendments thereto;
4.3.2 copies, certified by the Secretary of each of Black Warrior and
Active Subsidiary as of the Closing Date, of the bylaws of each of Black Warrior
and Active Subsidiary, respectively, and all amendments thereto;
4.3.3 copies, certified by a certificate of the Secretary of each of
Black Warrior and Active Subsidiary as of the Closing Date, of resolutions duly
adopted by the board of directors of each of Black Warrior and Active
Subsidiary, respectively, authorizing the execution and delivery by each of
Black Warrior and Active Subsidiary, respectively, of the Transaction Documents
and all other agreements attached hereto as Exhibits or contemplated herein, the
completion of the sale of the Note and Warrants and the taking of all such other
corporate action as shall have been required as a condition to, or in connection
with, the sale of the Note and Warrants;
4.3.4 the Agreement;
4.3.5 the Note;
4.3.6 the Warrants;
4.3.7 the Amendment of Registration Rights Agreement;
4.3.8 the Amendment of Security Agreement;
4.3.9 the Amendment of Subsidiary Security Agreement;
4.3.10 the Amendment of Subsidiary Guaranty;
4.3.11 an opinion of William S. Clarke, P.A., counsel to Seller, in form
and substance acceptable to Purchaser and addressing the matters set forth in
Sections 2.1, 2.2, 2.3, 2.7 and 2.8;
4.3.12 a certificate of an Officer of each of Black Warrior and Active
Subsidiary to the effect that the representations and warranties of each of
Black Warrior and Active Subsidiary, respectively, herein contained shall be
true as of and at the Closing Date with the same effect as though made at such
date, except as affected by transactions permitted or contemplated by this
Agreement; and further to the effect that each of Black Warrior and Active
Subsidiary shall have performed and complied with all covenants required by this
Agreement to be performed or complied with by each before the Closing Date; and
4.3.13 a letter in favor of Purchaser's lender, in the form of that
attached hereto as Exhibit F.
10
<PAGE>
ARTICLE V
GENERAL PROVISIONS
5.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained in this Agreement shall
survive the Closing.
5.2 Notices. All notices or other communications which are required or may
be given under this Agreement shall be in writing and shall be deemed to have
been duly given when delivered in person, transmitted by telecopier (with
receipt confirmed) or mailed by registered or certified first class mail,
postage prepaid, return receipt requested to the parties hereto at the address
set forth below (as the same may be changed from time to time by notice
similarly given) or the last known business or residence address of such other
person as may be designated by either party hereto in writing.
(a) If to Seller:
Black Warrior Wireline Corp.
3748 Highway #45 North
Columbus, Mississippi 39701
Attn: William L. Jenkins
(b) If to Purchaser:
St. James Capital Partners, L.P.
c/o St. James Capital Corp.
1980 Post Oak Boulevard, Suite 2030
Houston, Texas 77056
Attn: John L. Thompson
5.3 Miscellaneous. This Agreement (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
provided, however, this Section 5.3 is not intended to supersede or replace that
certain Agreement for Purchase and Sale dated June 5, 1997 (ii) shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns and is not intended to confer upon any other person any
rights or remedies hereunder, (iii) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Delaware and
(iv) may be executed in two or more counterparts which together shall constitute
a single agreement.
5.4 Publicity. Seller and Purchaser promptly shall advise and cooperate
with the other prior to issuing, or permitting any of its directors, officers,
employees or agents to issue, any press release with respect to this Agreement
or the transactions contemplated hereby. Notwithstanding the foregoing, without
the prior consent of Purchaser, neither Seller nor any of its directors,
officers, employees or agents shall issue any press release which includes the
name of Purchaser or any of Purchaser's affiliates.
5.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
party.
5.6 Schedules. All statements contained in any exhibit, schedule, appendix,
certificate or other instrument delivered by or on behalf of the parties hereto,
or in connection with the transactions contemplated hereby, are an integral part
of this Agreement and shall be deemed representations and warranties hereunder.
5.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which constitutes an original execution and, in the
aggregate, constitute a single document.
11
<PAGE>
5.8 Expense Reimbursement. Seller will reimburse to Purchaser, within 10
days after Purchaser's presentation of an invoice therefor, all of Purchaser's
direct costs relating to the negotiation, documentation and closing of the
transactions contemplated by this Agreement, including without limitation the
direct fees and expenses of counsel for Purchaser.
5.9 Restrictions on Transfer. (a) Purchaser shall not transfer the Note
except by the grant of a security interest to its lender or lenders. As between
Purchaser and its lender or lenders, the Note is transferrable in the same
manner and with the same effect as in the case of a negotiable instrument
payable to a specified person. Any lender to which Holder grants a security
interest in the Note shall be entitled to exercise all remedies to which it is
entitled by contract or by law, including (without limitation) transferring the
Note into its own name or into the name of any purchaser at any sale undertaken
in connection with enforcement by such lender of its remedies.
(b) Purchaser shall not transfer the Warrants or any new warrants
described in Section 1.4 of this Agreement except to the partners of Purchaser.
5.10 Expenses of Dispute Resolution. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or any of the
other Transaction Documents, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief to which it may be entitled.
12
<PAGE>
SELLER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Seller has signed this Agreement as of the date first
written above.
BLACK WARRIOR WIRELINE CORP.
By:
William L. Jenkins, President
13
<PAGE>
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date first
written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its
General Partner
By:
Jay Brown, Vice President
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
THIS NOTE MAY BE SUBORDINATE TO CERTAIN INDEBTEDNESS OF BLACK WARRIOR WIRELINE
CORP. AS AND TO THE EXTENT SET FORTH IN THAT CERTAIN AGREEMENT FOR PURCHASE AND
SALE DATED AS OF THE DATE HEREOF BETWEEN BLACK WARRIOR WIRELINE CORP. AND ST.
JAMES CAPITAL PARTNERS, L.P.
BLACK WARRIOR WIRELINE CORP.
$2,900,000 CONVERTIBLE PROMISSORY NOTE
$2,900,000 Houston, Texas October 10, 1997
BLACK WARRIOR WIRELINE CORP., a Delaware corporation (hereinafter
called the "Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to St. James Capital Partners, L.P., a Delaware limited partnership (hereinafter
called "Holder"), or its registered assigns, the principal sum of Two Million
Nine Hundred Thousand Dollars ($2,900,000), together with interest on the amount
of such principal sum from time to time outstanding, payable in accordance with
the terms set forth below. It is the intention of the parties that the principal
sums of this Note shall be advanced in multiple Advances (as defined below). No
Advance shall be made under this Note if an Event of Default (as defined below)
exists or would exist but for the passage of time. Interest under the Note shall
accrue on amounts actually advanced.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SECURED BY A
BORROWER SECURITY AGREEMENT BETWEEN THE COMPANY AND THE HOLDER DATED AS OF JUNE
5, 1997, AS MAY BE AMENDED OR MODIFIED (THE "SECURITY AGREEMENT"). THE
OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE FURTHER SUBJECT TO THE
TERMS OF A SUBSIDIARY SECURITY AGREEMENT BETWEEN THE SUBSIDIARIES OF THE COMPANY
AND THE HOLDER DATED AS OF JUNE 5, 1997, AS MAY BE AMENDED OR MODIFIED (THE
"SUBSIDIARY SECURITY AGREEMENT"), AND A SUBSIDIARY GUARANTY BY EACH OF THE
SUBSIDIARIES OF THE COMPANY IN FAVOR OF THE HOLDER DATED AS OF JUNE 5, 1997, AS
MAY BE AMENDED OR MODIFIED (THE "SUBSIDIARY GUARANTY").
ARTICLE I
DEFINITIONS
1.1 Definitions. For all purposes of this Note, except as otherwise
expressly provided or unless the context otherwise requires: (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular; (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as promulgated from time to time by the
Association of Independent Certified Public Accountants; and (c) the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Note as a whole and not to any particular Article, Section or other
subdivision.
"Advance" means a disbursement of proceeds of this Note.
"Board of Directors" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
"Bridge Loan Note" means the $3,000,000 10% Bridge Loan Promissory Note
of the Company to Holder dated as of June 5, 1997, as may be amended, modified,
substituted or replaced.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
"Common Stock" means shares of common stock, par value $0.0005 per
share, of the Company.
"Conversion Price" means the price per share determined in accordance
with Articles IV and V (as adjusted in accordance with the terms of this Note)
at which shares of Common Stock shall be delivered to Holder upon conversion of
this Note.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Event of Default" has the meaning specified in Section 3.1.
2
<PAGE>
"Indebtedness" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (a) for the principal of and premium, if any, and
interest on all debts of the Person whether outstanding on the date of this Note
or thereafter created (i) for money borrowed by such Person (including
capitalized lease obligations), (ii) for money borrowed by others (including
capitalized lease obligations) and guaranteed, directly or indirectly, by such
Person, or (iii) constituting purchase money indebtedness, or indebtedness
secured by property at the time of the acquisition of such property by such
Person, for the payment of which the Person is directly or contingently liable;
(b) for all accrued obligations of the Person in respect of any contract,
agreement or instrument imposing an obligation upon the Person to pay over
funds; (c) for all trade debt of the Person; and (d) for all deferrals,
renewals, extensions and refundings of, and amendments, modifications and
supplements to, any of the indebtedness referred to in (a), (b) or (c) above.
"Maturity Date", when used with respect to this Note, means October 10,
1999 (or such earlier date upon which this Note becomes due and payable under
Section 3.2).
"Note" means this $2,900,000 7% Convertible Promissory Note, as
hereafter amended, modified, substituted or replaced.
"Original Convertible Note" means the $2,000,000 9% Convertible
Promissory Note of the Company in favor of the Holder dated as of June 5, 1997,
as may be amended, modified, substituted or replaced.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
other entity, unincorporated organization or government or any agency or
political subdivision thereof.
"Subsidiary" means a corporation or other entity more than 50% of the
outstanding voting stock of which, or more than 50% of the equity interest in
which, is owned, directly or indirectly, by the Company or by one or more other
Subsidiaries of the Company, or by any combination of the Company and one or
more other Subsidiaries, provided, however, that the following shall not be
deemed Subsidiaries for purposes of this Note: Black Warrior International,
Inc.; Black Warrior International (Bermuda), Ltd.; Black Warrior Oil and Gas,
Inc.; and Black Warrior Syria, Ltd. (collectively, the "Inactive
Organizations"). However, if any Inactive Organization begins to conduct any
business (other than activities to "wind down" such organization), such Inactive
Organization shall be considered a Subsidiary under this Agreement from that
point forward. For purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
ARTICLE II
PAYMENTS
2.1 Interest. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate equal to seven percent (7%) per annum calculated on the basis of
a 360-day year. All past due amounts of principal and interest shall bear
interest at fifteen percent (15%) per annum calculated on the basis of a 360-day
year until paid.
2.2 Payment of Principal and Interest. Accrued and unpaid interest
under this Note shall be due and payable on October 10, 1998. The principal and
all remaining accrued and unpaid interest under this Note shall be due and
payable in full on the Maturity Date. At any time, the Holder may, at its option
and in lieu of cash, elect to be paid all accrued and unpaid interest owed to
Holder by the Company in the form of Common Stock, based on a price per share
equal to the Conversion Price (the "Price Per Share"). The amount of all accrued
and unpaid interest on the Maturity Date shall be divided by the Price Per Share
into a whole number of shares of Common Stock, with the remainder, if any, being
paid in cash.
3
<PAGE>
2.3 Prepayments. Subject to Holder's right to convert, at any time
before the Maturity Date, the Company may prepay this Note, in whole or in part,
without penalty or discount, upon five days' prior written notice given to
Holder pursuant to Section 7.5. All payments made under this Note shall be
applied first to accrued interest, and the balance, if any, to principal;
provided, however, that interest shall accrue on any remaining principal balance
and shall be payable at the rate provided above.
2.4 Manner of Payment. Cash payments of principal and interest on this
Note will be made by delivery of checks to Holder at its address as set forth in
this Note or wire transfers pursuant to instructions from Holder. If the date
upon which the payment of principal and interest is required to be made pursuant
to this Note occurs other than on a Business Day, then such payment of principal
and interest shall be made on the next occurring Business Day following said
payment date and shall include interest through said next occurring Business
Day.
2.5 Security; Guaranty. This Note is secured by the collateral defined
in the Security Agreement and by the collateral defined in the Subsidiary
Security Agreement. This Note and the obligations hereunder and under the
Security Agreement and the Subsidiary Security Agreement are guaranteed by the
Subsidiaries of the Company pursuant to the Subsidiary Guaranty.
ARTICLE III
REMEDIES
3.1 Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment or mandatory
prepayment of the principal or interest on this Note, or in the payment
or a mandatory prepayment of the principal or interest on the Original
Convertible Note or the Bridge Loan Note, when such principal or
interest becomes due and payable and such default remains uncured for a
period of five days; or
(b) the Company or any Subsidiary defaults in the performance
of any covenant made by the Company, and such default remains uncured
for a period of 45 days in any of (i) those certain Agreements for
Purchase and Sale dated of even date herewith and as of June 5, 1997,
respectively, by and between the Company and Holder (the "Purchase
Agreements"), (ii) the Common Stock Purchase Warrants issued by the
Company to Holder as of the date hereof and as of June 5, 1997,
respectively (the "Warrants"); (iii) that certain Registration Rights
Agreement dated as of June 5, 1997, as may be thereafter amended or
modified, by and between the Company and the Holder, pursuant to which
the Company grants to the Holder certain registration rights in respect
of the shares of Common Stock that may be issued under the Original
Convertible Note, this Note and upon exercise of the Warrants (the
"Registration Rights Agreement"); (iv) the Security Agreement; (v) the
Original Convertible Note or the Bridge Loan Note; (vi) the Subsidiary
Security Agreement; (vii) the Subsidiary Guaranty; or (viii) this Note
(other than a default in the performance of a covenant specifically
addressed elsewhere in this Section 3.1); provided that a default in
the performance of any covenant in Sections 8(a), 8(b), 8(c), 8(d),
8(e), 8(f), 8(h), 8(i), 8(j), 8(k), 8(l), 8(m) or 8(n) of the Security
Agreement or Section 6.1 of this Note shall be an Event of Default
immediately upon occurrence; or
(c) any representation or warranty made by the Company or any
Subsidiary in the Purchase Agreements, the Warrants, the Registration
Rights Agreement, the Original Convertible Note, the Bridge Loan Note,
the Security Agreement, the Subsidiary Security Agreement, the
Subsidiary Guaranty, or this Note or in any certificate furnished by
the Company in connection with the consummation of the transaction
contemplated thereby or hereby, is untrue in any material respect as of
the date of making thereof and such default remains uncured for a
period of 45 days; or
(d) the Company or any Subsidiary defaults in the payment when
due (whether by lapse of time, by declaration, by call for redemption
or otherwise) of the principal of or interest on any Indebtedness of
the Company or such Subsidiary (other than the Indebtedness evidenced
by this Note) having an aggregate principal amount in excess of
$100,000 or on any Indebtedness of the Company to any of its
stockholders and such default remains uncured for a period of 45 days;
or
4
<PAGE>
(e) a court of competent jurisdiction enters a judgment or
judgments against the Company or any Subsidiary, or any property or
assets of the Company or any Subsidiary, for the payment of money
aggregating $100,000 or more in excess of applicable insurance coverage
(other than the judgment disclosed on Schedule 3.1(e) hereto) and such
default remains uncured for a period of 45 days; or
(f) a court of competent jurisdiction enters (i) a decree or
order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (ii) a
decree or order adjudging the Company or any Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company or any Subsidiary under any applicable federal or state
law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Subsidiary or of any substantial part of the property of the Company or
any Subsidiary or ordering the winding up or liquidation of the affairs
of the Company or any Subsidiary and any such decree or order of relief
or any such other decree or order remains unstayed for a period of 90
days from its date of entry; or
(g) the Company or any Subsidiary commences a voluntary case
or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the Company or
any Subsidiary files a petition, answer or consent seeking
reorganization or relief under any applicable federal or state law, or
the Company or any Subsidiary makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts
generally as they become due; or
(h) any person or group (within the meaning of Section 13(d)
of the Securities Exchange Act of 1934) becomes the beneficial owner of
40% or more of the total voting power of the Company and was not the
beneficial owner of 40% or more of the total voting power of the
Company as of the date hereof; provided that the foregoing shall not
include any person or group who or which acquires the Warrants or
shares of the Company's Common Stock issuable upon exercise of the
Warrants or upon conversion of the Original Convertible Note or this
Note; and further provided that such default has not been cured or
waived within ninety (90) days following such change of beneficial
ownership.
(i) the Company or any Subsidiary (1) merges or consolidates
with or into any other Person (unless the Company or any of its
Subsidiaries is the surviving or acquiring party); (2) dissolves or
liquidates; or (3) sells all or any substantial portion of its assets
(unless the purchaser is a Subsidiary of the Company).
3.2 Acceleration of Maturity. This Note and all accrued interest shall
automatically become immediately due and payable if an Event of Default
described in Sections 3.1(f), 3.1(g) or 3.1(i) occurs and, this Note shall, at
the option of the Holder in its sole discretion, become immediately due and
payable if any other Event of Default occurs, and in every such case the Holder
of the Note may declare the principal and interest on the Note to be due and
payable immediately.
5
<PAGE>
ARTICLE IV
CONVERSION OF NOTE
Subject to and upon compliance with the provisions of this Article, at
the option of Holder, all or any part of this Note may be converted at any time,
at the principal amount hereof together with accrued and unpaid interest
thereon, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock. The Conversion
Price shall initially be $4.6327 per share. Notwithstanding anything else to the
contrary set forth herein, the Holder shall have the right to convert this Note
pursuant to the terms set forth herein at any time, including the 30 Business
Days following (i) the Maturity Date or (ii) any prepayment pursuant to Section
2.3 hereof. If Holder elects to convert this Note after a prepayment has been
made pursuant to Section 2.3, then Holder shall return all or such portion of
the funds paid to Holder as to which Holder has elected to convert.
ARTICLE V
ADJUSTMENT OF CONVERSION PRICE
5.1 Anti-Dilution Provisions. The Conversion Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment of
the Conversion Price, the holder of this Note shall thereafter be entitled to
purchase, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment.
5.2 Adjustment of Conversion Price Upon Issuance of Common Stock.
5.2.1 (A) If and whenever after the date hereof the Company
shall issue or sell any Common Stock for no consideration or for a
consideration per share less than the Conversion Price then, forthwith,
upon such issue or sale, the Conversion Price shall be reduced (but not
increased, except as otherwise specifically provided in Section 5.2.2),
to the price (calculated to the nearest one-ten thousandth of a cent)
determined by dividing (x) an amount equal to the sum of (i) the
aggregate number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing Conversion
Price plus (ii) the consideration received by the Company upon such
issue or sale by (y) the aggregate number of shares of Common Stock
outstanding immediately after such issue or sale.
(B) Notwithstanding the provisions of this Section
5.2, no adjustment shall be made in the Conversion Price in the event
that the Company issues, in one or more transactions, (i) Common Stock
upon exercise of any options issued to officers, directors or employees
of the Company pursuant to a stock option plan or an employment,
severance or consulting agreement as now or hereafter in effect, in
each case approved by the Board of Directors (provided that the
aggregate number of shares of Common Stock which may be issuable,
including options issued prior to the date hereof, under all such
employee plans and agreements shall at no time exceed the number of
such shares of Common Stock outstanding on the date hereof on a fully
diluted basis that are issuable under currently effective employee
plans and agreements); (ii) Common Stock upon exercise of the Original
Convertible Note or this Note or any other warrant issued pursuant to
the terms of the Purchase Agreements; (iii) Common Stock upon exercise
of any stock purchase warrant or option (other than the options
referred to in clause (i) above) or other convertible security
outstanding on the date hereof; or (iv) Common Stock issued as
consideration in acquisitions. In addition, for purposes of calculating
any adjustment of the Conversion Price as provided in this Section 5.2,
all of the shares of Common Stock issuable pursuant to any of the
foregoing shall be assumed to be outstanding prior to the event causing
such adjustment to be made.
5.2.2 For purposes of this Section 5.2, the following shall be
applicable:
6
<PAGE>
(A) Issuance of Rights or Options. In case at any time after
the date hereof the Company shall in any manner grant (whether directly
or by assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock or any
stock or securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or securities being herein
called "Convertible Securities") (other than warrants, options or
convertible securities issued as consideration for or assumed in
conjunction with an acquisition or to officers, directors, or employees
of the acquired entity in conjunction therewith), whether or not such
rights or options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise
of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, or plus, in the case of such rights
or options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon
the exercise of such rights or options) shall be less than the
Conversion Price in effect as of the date of granting such rights or
options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as
of the date of the granting of such rights or options and to have been
issued for such price per share, with the effect on the Conversion
Price specified in Section 5.2.1 hereof. Except as provided in Section
5.2.2 hereof, no further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Stock or of such
Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(B) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any right or option referred to in Section 5.2.2 above,
the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in Section 5.2.2(A)
hereof, or the rate at which any Convertible Securities referred to in
Section 5.2.2(A) hereof, are convertible into or exchangeable for
Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Conversion Price then in
effect hereunder shall forthwith be readjusted (increased or decreased,
as the case may be) to the Conversion Price that would have been in
effect at such time had such rights, options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of any such option
or right referred to in Section 5.2.2(A) hereof, or on the termination
of any such right to convert or exchange any such Convertible
Securities referred to in Section 5.2.2(A) hereof, the Conversion Price
then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Conversion Price that would have
been in effect at the time of such expiration or termination had such
right, option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been
granted, issued or sold, and the Common Stock issuable thereunder shall
no longer be deemed to be outstanding. If the purchase price provided
for in Section 5.2.2(A) hereof or the rate at which any Convertible
Securities referred to in Section 5.2.2(A) hereof are convertible into
or exchangeable for Common Stock shall be reduced at any time under or
by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the
exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Conversion Price then in effect
hereunder shall, if not already adjusted, forthwith be adjusted to such
amount as would have obtained had such right, option or Convertible
Securities never been issued as to such Common Stock and had
adjustments been made upon the issuance of the Common Stock delivered
as aforesaid, but only if as a result of such adjustment the Conversion
Price then in effect hereunder is thereby reduced.
7
<PAGE>
(C) Consideration for Stock. In case at any time Common Stock
or Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for
cash, the consideration therefor shall be deemed to be the amount
received by the Company therefor. In case at any time any Common Stock,
Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for
consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value
of such consideration, as determined reasonably and in good faith by
the Board of Directors of the Company. In case at any time any Common
Stock, Convertible Securities or any rights or options to purchase any
Common Stock or Convertible Securities shall be issued in connection
with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration received therefor shall be
deemed to be the fair value, as determined reasonably and in good faith
by the Board of Directors of the Company, of such portion of the assets
and business of the nonsurviving corporation as such Board of Directors
may determine to be attributable to such Common Stock, Convertible
Securities, rights or options as the case may be. In case at any time
any rights or options to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issuance
and sale of other securities of the Company, together consisting of one
integral transaction in which no consideration is allocated to such
rights or options by the parties, such rights or options shall be
deemed to have been issued without consideration.
(D) Record Date. In the case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock
or Convertible Securities, or (ii) to subscribe for or purchase Common
Stock or Convertible Securities, then such record date shall be deemed
to be the date of the issuance or sale of the Common Stock or
Convertible Securities deemed to have been issued or sold as a result
of the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription
or purchase, as the case may be.
(E) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned directly
by the Company in treasury, and the disposition of any such shares
shall be considered an issuance or sale of Common Stock for the purpose
of this Section 5.2.
5.3 Stock Dividends. In case the Company shall declare a dividend or
make any other distribution upon any shares of the Company, payable in Common
Stock or Convertible Securities, any Common Stock or Convertible Securities, as
the case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 Stock Splits and Reverse Splits. In the event that the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Shares into
which this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this Note
may be converted immediately prior to such combination shall be proportionately
reduced. Except as provided in this Section 5.4 no adjustment in the Conversion
Price and no change in the number of Shares shall be made under this Article V
as a result of or by reason of any such subdivision or combination.
8
<PAGE>
5.5 Reorganizations and Asset Sales. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
5.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in Section 5.5.3), lawful and adequate
provisions shall be made whereby the holder of this Note shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Note and in lieu of the shares immediately theretofore receivable upon the
exercise of the rights represented hereby, such shares of capital stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger, share exchange or sale not taken place,
and in any such case appropriate provision reasonably satisfactory to such
holder shall be made with respect to the rights and interests of such holder to
the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Conversion Price and of the number of shares receivable
upon the exercise) shall thereafter be applicable, as nearly as possible, in
relation to any shares of capital stock, securities or assets thereafter
deliverable upon the exercise of this Note.
5.5.2 In the event of a merger, share exchange or
consolidation of the Company with or into another Person as a result of which a
number of shares of common stock or its equivalent of the successor Person
greater or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are issuable
to holders of Common Stock, then the Conversion Price in effect immediately
prior to such merger, share exchange or consolidation shall be adjusted in the
same manner as though there were a subdivision or combination of the outstanding
shares of Common Stock.
5.5.3 The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such Holder appearing on the books of the Company the obligation
to deliver to such Holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such Holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such Successor Person will issue a
new Note revised to reflect the modifications in this Note effected pursuant to
this Section 5.5.
5.5.4 If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the conversion of
this Note either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
9
<PAGE>
5.6 Adjustment for Asset Distribution. If the Company declares a
dividend or other distribution payable to all holders of shares of Common Stock
in evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Conversion Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
5.7 De Minimis Adjustments. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of the Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which by reason of this Section 5.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
5.8 Notice of Adjustment. Whenever the Conversion Price or the number
of Shares issuable upon the conversion of the Note shall be adjusted as herein
provided, or the rights of the holder hereof shall change by reason of other
events specified herein, the Company shall compute the adjusted Conversion Price
and the adjusted number of Shares in accordance with the provisions hereof and
shall prepare an Officer's Certificate setting forth the adjusted Conversion
Price and the adjusted number of Shares issuable upon the conversion of this
Note or specifying the other shares of stock, securities or assets receivable as
a result of such change in rights, and showing in reasonable detail the facts
and calculations upon which such adjustments or other changes are based. The
Company shall cause to be mailed to the Holder hereof copies of such Officer's
Certificate together with a notice stating that the Conversion Price and the
number of Shares purchasable upon conversion of this Note have been adjusted and
setting forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of this Note.
5.9 Notifications to Holders. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock
payable in capital stock or make any special dividend or other
distribution (other than cash dividends) to the holders of its
Common Stock;
(ii) to offer for subscription pro rata to all of the
holders of its Common Stock any additional shares of capital
stock of any class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with
another Person, or sale, transfer or other disposition of all
or substantially all of its assets; or
(iv) to effect a voluntary or involuntary
dissolution, liquidation or winding up of the Company,
10
<PAGE>
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock, as the case may be, for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
as the case may be.
5.10 Company to Prevent Dilution. If any event or condition occurs as
to which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
this Note evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Note, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Conversion Price and the number of shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares of the type contemplated in Section 5.4 hereof, and then
in no event to an amount greater than the Conversion Price as adjusted pursuant
to Section 5.4 hereof.
ARTICLE VI
COVENANTS
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 Payment of Principal and Accrued Interest. The Company will duly
and punctually pay or cause to be paid the principal sum of this Note, together
with interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.2 Corporate Existence. The Company will, and will cause each
Subsidiary to, do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Company or a Subsidiary shall not be
required to preserve any such right or franchise if it shall reasonably
determine that the preservation thereof is no longer desirable in the conduct of
its business.
6.3 Taxes; Claims; etc. The Company will, and will cause each
Subsidiary to, promptly pay and discharge all lawful taxes, assessments, and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any of its properties, real, personal, or mixed, before the same shall
become in default, as well as all lawful claims for labor, materials, and
supplies or otherwise which, if unpaid, might become a lien or charge upon such
properties or any part thereof, and which lien or charge will have a material
adverse effect on the business of the Company; provided, however, that neither
the Company nor any Subsidiary shall be required to pay or cause to be paid any
such tax, assessment, charge, levy, or claim prior to institution of foreclosure
proceedings if the validity thereof shall concurrently be contested in good
faith by appropriate proceedings and if the Company shall have established
reserves deemed by the Company adequate with respect to such tax, assessment,
charge, levy, or claim.
11
<PAGE>
6.4 Maintenance of Existence and Properties. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.5 SEC Reports. The Company will deliver to the Holder within 20 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required or elects to file with the SEC pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934. The Company will timely comply
with its reporting and filing obligations under the applicable federal
securities laws.
6.6 Notice of Defaults. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting holders to accelerate the maturity of such Indebtedness.
6.7 Compliance with Laws. The Company will promptly comply with all
laws, ordinances and governmental rules and regulations to which it is subject,
the violation of which would materially and adversely affect the Company.
6.8 Amendments to Charter. The Company will not amend or modify its
charter without the prior written consent of Holder.
6.9 Mergers and Acquisitions. Without the consent of the Holder, the
Company or any Subsidiary will not dissolve, liquidate, consolidate, merge or
enter into a share exchange with or sell or transfer all or a substantial
portion of its assets to any Person.
12
<PAGE>
6.10 Election of Director. The Company will use its best efforts to
cause the election, at all shareholders' meetings called for the purpose of
electing directors of the Company or in any other action taken to elect such
directors, of one person designated by Holder as a nominee (the "Designated
Director"). If a vacant directorship arises due to the resignation or disability
of the Designated Director, or if the Designated Director is removed for any
reason, the Company will use its best efforts to cause the appointment of
another person designated by Holder to replace the Designated Director.
ARTICLE VII
MISCELLANEOUS
7.1 Consent to Amendments. This Note may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if and only if the Company shall obtain the
written consent to such amendment, action or omission to act from the holders of
a majority of the aggregate principal amount of this Note.
7.2 Benefits of Note; No Impairment of Rights of Holder of Senior
Indebtedness. Nothing in this Note, express or implied, shall give to any
Person, other than the Company, Holder, and their successors any benefit or any
legal or equitable right, remedy or claim under or in respect of this Note.
7.3 Successors and Assigns. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
7.4 Restrictions on Transfer. Holder shall not transfer this Note
except (by the grant of a security interest) to its lender or lenders. As
between Holder and its lender or lenders, this Note is transferable in the same
manner and with the same effect as in the case of a negotiable instrument
payable to a specified person. Any lender to which Holder grants a security
interest in this Note shall be entitled to exercise all remedies to which it is
entitled by contract or by law, including (without limitation) transferring this
Note into its own name or into the name of any purchaser at any sale undertaken
in connection with enforcement by such lender of its remedies.
7.5 Notice; Address of Parties. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: Black Warrior Wireline Corp., 3748 Highway #45 North, Columbus,
Mississippi 39701, or at any other address designated by the Company in writing
to Holder; if to Holder: St. James Capital Partners, L.P., _ St. James Capital
Corp., 1980 Post Oak Boulevard, Suite 2030, Houston, Texas 77056, Attn: John L.
Thompson, or at any other address designated by Holder to the Company in
writing.
7.6 Separability Clause. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
7.7 Governing Law. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware (without regard to
principles of choice of law).
13
<PAGE>
7.8 Usury. It is the intention of the parties hereto to conform
strictly to the applicable laws of the State of Delaware and the United States
of America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (hereinafter referred to in this
Section 7.9 as "Applicable Law"). The Holder shall have no right to claim, to
charge or to receive any interest in excess of the maximum rate of interest, if
any, permitted to be charged on that portion of the amount representing
principal which is outstanding and unpaid from time to time by Applicable Law.
Determination of the rate of interest for the purpose of determining whether
this Note is usurious under Applicable Law shall be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
actual time of this Note, all interest or other sums deemed to be interest
(hereinafter referred to in this Section 7.9 as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
BLACK WARRIOR WIRELINE CORP.
By:
William L. Jenkins, President
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND, ACCORDINGLY, THE
SECURITIES REPRESENTED BY THIS WARRANT MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
BLACK WARRIOR WIRELINE, CORP.
Expiring on October 10, 2002
This Warrant to Purchase Common Stock (the "Warrant") certifies that for
value received, St. James Capital Partners, L.P., a Delaware limited partnership
(the "Holder"), or its assigns, is entitled to subscribe for and purchase from
the Company (as hereinafter defined), in whole or in part, 725,000 shares of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock (as hereinafter defined) at an initial Exercise Price (as hereinafter
defined), subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. This Warrant and
all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on October
10, 2002.
As used herein, the following terms shall have the meanings set forth
below:
"Company" shall mean Black Warrior Wireline Corp., a Delaware corporation,
and shall also include any successor thereto with respect to the obligations
hereunder, by merger, consolidation or otherwise.
<PAGE>
"Common Stock" shall mean and include the Company's Common Stock, par value
$.0005 per share, authorized on the date of the original issue of this Warrant
and shall also include (i) in case of any reorganization, reclassification,
consolidation, merger, share exchange or sale, transfer or other disposition of
assets of the character referred to in Section 3.5 hereof, the stock, securities
provided for in such Section 3.5, and (ii) any other shares of common stock of
the Company into which such shares of Common Stock may be converted.
"Exercise Price" shall mean the initial purchase price of $4.6327 per share
of Common Stock payable upon exercise of the Warrants. The Exercise Price shall
be adjusted from time to time pursuant to the provisions hereof.
"Market Price" for any day, when used with reference to Common Stock, shall
mean the price of said Common Stock determined as follows: (i) the last reported
sale price for the Common Stock on such day on the principal securities exchange
on which the Common Stock is listed or admitted to trading or if no such sale
takes place on such date, the average of the closing bid and asked prices
thereof as officially reported, or, if not so listed or admitted to trading on
any securities exchange, the last sale price for the Common Stock on the
National Association of Securities Dealers National Market System or SmallCap
Market on such date, or, if there shall have been no trading on such date or if
the Common Stock shall not be listed on such system, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any NASD
member firm selected from time to time by the Company for such purpose, in each
such case, unless otherwise provided herein, averaged over a period of ten (10)
consecutive Trading Days prior to the date as of which the determination is to
be made; or (ii) if the Common Stock shall not be listed or admitted to trading
or the closing bid and asked prices are unable to be furnished by an NASD member
firm, as provided in clause (i) above, the fair market value of the Common Stock
as determined in good faith by the Board of Directors of the Company.
"Note" shall mean the 7% Convertible Promissory Note of the Company issued
to St. James Capital Partners, L.P. as of the date hereof in the original
principal amount of $2,900,000, as may be amended, modified, substituted or
replaced.
"Outstanding," when used with reference to Common Stock, shall mean (except
as otherwise expressly provided herein) at any date as of which the number of
shares thereof is to be determined, all issued shares of Common Stock, except
shares then owned or held by or for the account of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Days" shall mean any days during the course of which the principal
securities exchange on which the Common Stock is listed or admitted to trading
is open for the exchange of securities.
"Warrant" shall mean the right upon exercise to purchase one Warrant Share.
"Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
2
<PAGE>
ARTICLE I
EXERCISE OF WARRANTS
I.1 Method of Exercise.
(A) Subject to Section 1.1 (B), the Warrants represented hereby may be
exercised by the holder hereof, in whole or in part, at any time and from time
to time on or after the date hereof until 5:00 p.m., Houston, Texas time, on
October 10, 2002. To exercise the Warrants, the holder hereof shall deliver to
the Company, at the Warrant Office designated in Section 2.1 hereof, (i) a
written notice in the form of the Subscription Notice attached as an exhibit
hereto, stating therein the election of such holder to exercise the Warrants in
the manner provided in the Subscription Notice; (ii) payment in full of the
Exercise Price (A) in cash or by bank check for all Warrant Shares purchased
hereunder, or (B) through a "cashless" or "net-issue" exercise of each such
Warrant ("Cashless Exercise"); the holder shall exchange each Warrant subject to
a Cashless Exercise for that number of Warrant Shares determined by multiplying
the number of Warrant Shares issuable hereunder by a fraction, the numerator of
which shall be the difference between (x) the Market Price and (y) the Exercise
Price for each such Warrant, and the denominator of which shall be the Market
Price; the Subscription Notice shall set forth the calculation upon which the
Cashless Exercise is based, or (C) a combination of (A) and (B) above; and (iii)
this Warrant. The Warrants shall be deemed to be exercised on the date of
receipt by the Company of the Subscription Notice, accompanied by payment for
the Warrant Shares and surrender of this Warrant, as aforesaid, and such date is
referred to herein as the "Exercise Date". Upon such exercise, the Company
shall, as promptly as practicable and in any event within ten (10) business
days, issue and deliver to such holder a certificate or certificates for the
full number of the Warrant Shares purchased by such holder hereunder, and shall,
unless the Warrants have expired, deliver to the holder hereof a new Warrant
representing the number of Warrants, if any, that shall not have been exercised,
in all other respects identical to this Warrant. As permitted by applicable law,
the Person in whose name the certificates for Common Stock are to be issued
shall be deemed to have become a holder of record of such Common Stock on the
Exercise Date and shall be entitled to all of the benefits of such holder on the
Exercise Date, including without limitation, the right to receive dividends and
other distributions for which the record date falls on or after the Exercise
Date and the right to exercise voting rights.
(B) In the event that the Market Price for the Company's Common Stock
exceeds $_____ per share for twenty (20) consecutive trading days and the
trading volume in the Company's Common Stock during each of such twenty days was
at least __________ shares per day, the Company shall have the right to require
exercise of the Warrant. If the Holder has not exercised the Warrants on or
before the thirtieth calendar day after the twentieth consecutive trading day
referenced in the preceding sentence, the Company shall be entitled to redeem,
effective on the thirty-first day after the twentieth consecutive trading day,
all of the Warrants which have not been exercised at such date at a price of
$_____ per Warrant.
I.2 Expenses and Taxes. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
I.3 Reservation of Shares. The Company shall reserve at all times so long
as the Warrants remain outstanding, free from preemptive rights, out of its
treasury Common Stock or its authorized but unissued shares of Common Stock, or
both, solely for the purpose of effecting the exercise of the Warrants, a
sufficient number of shares of Common Stock to provide for the exercise of the
Warrants.
3
<PAGE>
I.4 Valid Issuance. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
I.5 Purchase Agreement. The Warrants represented hereby are part of a duly
authorized issuance and sale of warrants to purchase Common Stock issued and
sold pursuant to that certain Agreement of Purchase and Sale dated as of the
date hereof (the "Agreement"), between the Company and the Holder. The holder
hereof shall be entitled to registration under the Securities Act and any
applicable state securities or blue sky laws to the extent set forth in the
Registration Rights Agreement, as hereafter amended. The terms of the Agreement
are hereby incorporated herein for all purposes and shall be considered a part
of this Warrant as if they had been fully set forth herein. Notwithstanding the
previous sentence, in the event of any conflict between the provisions of the
Agreement and of this Warrant, the provisions of this Warrant shall control.
I.6 Acknowledgment of Rights. At the time of the exercise of the Warrants
in accordance with the terms hereof and upon the written request of the holder
hereof, the Company will acknowledge in writing its continuing obligation to
afford to such holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant;
provided, however, that if the holder hereof shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
I.7 No Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of this Warrant. If more than
one Warrant shall be presented for exercise at the same time by the same holder,
the number of full shares of Common Stock which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of whole shares
of Common Stock purchasable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 1.7, be issuable on the exercise of this Warrant, the Company shall pay
an amount in cash calculated by it to be equal to the Market Price of one share
of Common Stock at the time of such exercise multiplied by such fraction
computed to the nearest whole cent.
ARTICLE II
TRANSFER
II.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices at 3748 Highway #45 North, Columbus, Mississippi 39701
and may subsequently be such other office of the Company or of any transfer
agent of the Common Stock in the continental United States as to which written
notice has previously been given to the holder hereof. The Company shall
maintain, at the Warrant Office, a register for the Warrants in which the
Company shall record the name and address of the Person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
II.2 Ownership of Warrants. The Company may deem and treat the Person in
whose name the Warrants are registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Article II. Notwithstanding the foregoing, the Warrants
represented hereby, if properly assigned in compliance with this Article II, may
be exercised by an assignee for the purchase of Warrant Shares without having a
new Warrant issued.
II.3 Restrictions on Transfer of Warrants. The Company agrees to maintain
at the Warrant Office books for the registration and transfer of the Warrants.
Subject to the restrictions on transfer of the Warrants in this Section 2.3, the
Company, from time to time, shall register the transfer of the Warrants in such
books upon surrender of this Warrant at the Warrant Office properly endorsed or
accompanied by appropriate instruments of transfer and written instructions for
transfer satisfactory to the Company. Upon any such transfer and upon payment by
the holder or its transferee of any applicable transfer taxes, new Warrants
shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrants shall be cancelled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
or income taxes) and all other expenses and charges payable in connection with
the transfer of the Warrants pursuant to this Section 2.3.
4
<PAGE>
II.3.1 Restrictions in General. The holder of the Warrants agrees that
it will not transfer the Warrants unless registration of such Warrant Shares
under the Securities Act and any applicable state securities or blue sky laws
has become effective or the holder has provided to the Company an opinion of
counsel acceptable to the Company that such registration is not required.
Notwithstanding the preceding sentence, however, St. James Capital Partners,
L.P., as the initial Holder of the Warrants, may transfer Warrants to its
partners of record on September 30, 1997 at any time and may at any time grant a
security interest in the Warrants to its lender or lenders. Prior to any
transfer (other than the grant of a security interest) as provided herein, the
transferor shall provide written notice to the Company and an opinion of counsel
to the effect that the proposed transfer is exempt from registration under all
applicable securities laws, all in form and substance reasonably satisfactory to
the Company. Any lender or lenders to which the Holder grants a security
interest in the Warrants shall be entitled to exercise all remedies to which it
is entitled by contract or by law, including (without limitation) transferring
the Warrants into its own name or into the name of any purchaser at any sale
undertaken in connection with enforcement by such lender of its remedies. The
partners of St. James Capital Partners, L.P. shall not be entitled to transfer
Warrants prior to completion of a registered public offering of the Company's
Common Stock.
II.4 Compliance with Securities Laws. Subject to the terms of the
Registration Rights Agreement between the Holder and the Company dated as of
June 5, 1997, as amended or modified (the "Registration Rights Agreement"), and
notwithstanding any other provisions contained in this Warrant except Section
2.3.1, the holder hereof understands and agrees that the following restrictions
and limitations shall be applicable to all Warrant Shares and to all resales or
other transfers thereof pursuant to the Securities Act:
II.4.1 The holder hereof agrees that the Warrant Shares shall not be
sold or otherwise transferred unless the Warrant Shares are registered under the
Securities Act and applicable state securities or blue sky laws or are exempt
therefrom.
II.4.2 A legend in substantially the following form will be placed on
the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAW AND, ACCORDINGLY, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS."
II.4.3 Stop transfer instructions will be imposed with respect to the
Warrant Shares so as to restrict resale or other transfer thereof, subject to
this Section 2.4.
ARTICLE III
ANTI-DILUTION
III.1 Anti-Dilution Provisions. The Exercise Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each adjustment of
the Exercise Price, the holder of this Warrant shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
III.2 Adjustment of Exercise Price Upon Issuance of Common Stock.
III.2.1 (A) If and whenever after the date hereof the Company shall
issue or sell any Common Stock for no consideration or for a consideration per
share less than the Exercise Price, then, forthwith upon such issue or sale, the
Exercise Price shall be reduced (but not increased, except as otherwise
specifically provided in Section 3.2.2(C) hereof), to the price (calculated to
the nearest one-ten thousandth of a cent) determined by dividing (x) an amount
equal to the sum of (i) the aggregate number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by then existing
Exercise Price plus (ii) the consideration received by the Company upon such
issue or sale by (y) the aggregate number of shares of Common Stock outstanding
immediately after such issue or sale.
5
<PAGE>
(B) Notwithstanding the provisions of this Section 3.2, no
adjustment shall be made in the Exercise Price in the event that the Company
issues, in one or more transactions, (i) Common Stock or convertible securities
upon exercise of any options issued to officers, directors or employees of the
Company pursuant to a stock option plan or an employment, severance or
consulting agreement as now or hereafter in effect, in each case approved by the
Board of Directors (provided that the aggregate number of shares of Common Stock
which may be issuable, including options issued prior to the date hereof, under
all such employee plans and agreements shall at no time exceed the number of
such shares of Common Stock that are issuable under currently effective employee
plans and agreements); (ii) Common Stock upon exercise of the Warrants or any
other warrant issued pursuant to the terms of the Agreement or otherwise issued
to the Holder; (iii) Common Stock upon exercise of any stock purchase warrant or
option (other than the options referred to in clause (i) above) or other
convertible security outstanding on the date hereof; (iv) Common Stock upon
conversion of the Note; or (v) Common Stock issued as consideration in
acquisitions (including warrants, options or convertible securities issued as
consideration for an acquisition or to officers, directors or employees of the
acquired entity in conjunction therewith). In addition, for purposes of
calculating any adjustment of the Exercise Price as provided in this Section
3.2, all of the shares of Common Stock issuable pursuant to any of the foregoing
shall be assumed to be outstanding prior to the event causing such adjustment to
be made.
III.2.2 For purposes of this Section 3.2, the following Sections
3.2.2(A) to 3.2.2(E) inclusive, shall be applicable:
(A) Issuance of Rights or Options. In case at any time after the date
hereof the Company shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") (other than warrants, options or convertible
securities issued as consideration for or assumed in conjunction with an
acquisition or to officers, directors or employees of the acquired entity
in conjunction therewith), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares of Common
Stock are issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of such rights or options, or plus, in the
case of such rights or options that relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) shall be less than the Exercise Price
in effect as of the date of granting such rights or options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall be
deemed to be outstanding as of the date of the granting of such rights or
options and to have been issued for such price per share, with the effect
on the Exercise Price specified in Section 3.2.1 hereof. Except as provided
in Section 3.2.2 hereof, no further adjustment of the Exercise Price shall
be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon exercise of such rights or options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(B) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in
any right or option referred to in Section 3.2.2, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 3.2.2, or the rate at which
any Convertible Securities referred to in Section 3.2.2, are convertible
into or exchangeable for Common Stock shall change (other than under or by
reason of provisions designed to protect against dilution), the Exercise
Price then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Exercise Price that would have been
in effect at such time had such rights, options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. On the expiration of any such option or right
referred to in Section 3.2.2, or on the termination of any such right to
convert or exchange any such Convertible Securities referred to in Section
3.2.2, the Exercise Price then in effect hereunder shall forthwith be
readjusted (increased or decreased, as the case may be) to the Exercise
Price that would have been in effect at the time of such expiration or
termination had such right, option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never been
granted, issued or sold, and the Common Stock issuable thereunder shall no
longer be deemed to be outstanding. If the purchase price provided for in
Section 3.2.2 or the rate at which any Convertible Securities referred to
in Section 3.2.2 are convertible is reduced at any time under or by reason
of provisions with respect thereto designed to protect against dilution,
then in case of the delivery of Common Stock upon the exercise of any such
right or option or upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall, if not
already adjusted, forthwith be adjusted to such amount as would have
obtained had such right, option or Convertible Securities never been issued
as to such Common Stock and had adjustments been made upon the issuance of
the Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Exercise Price then in effect hereunder is thereby reduced.
6
<PAGE>
(C) Consideration for Stock. In case at any time Common Stock or
Convertible Securities or any rights or options to purchase any such Common
Stock or Convertible Securities shall be issued or sold for cash, the
consideration therefor shall be deemed to be the amount received by the
Company therefor. In case at any time any Common Stock, Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for consideration other than
cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. In case at any time any Common Stock, Convertible Securities or
any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection with any merger or consolidation
in which the Company is the surviving corporation, the amount of
consideration received therefor shall be deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable to
such Common Stock, Convertible Securities, rights or options as the case
may be. In case at any time any rights or options to purchase any shares of
Common Stock or Convertible Securities shall be issued in connection with
the issuance and sale of other securities of the Company, together
consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options
shall be deemed to have been issued with consideration.
(D) Record Date. In the case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock or
Convertible Securities, or (ii) to subscribe for or purchase Common Stock
or Convertible Securities, then such record date shall be deemed to be the
date of the issuance or sale of the Common Stock or Convertible Securities
deemed to have been issued or sold as a result of the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(E) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned directly by the Company in
treasury, and the disposition of any such shares shall be considered an
issuance or sale of Common Stock for the purpose of this Section 3.2.
III.3 Stock Dividends. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
III.4 Stock Splits and Reverse Splits. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of Warrant Shares purchasable upon
the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced. Except as provided in this Section 3.4, no adjustment
in the Exercise Price and no change in the number of Warrant Shares purchasable
shall be made under this Article III as a result of, or by reason of, any such
subdivision or combination.
7
<PAGE>
III.5 Reorganizations and Asset Sales. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that a holder of Common Stock of
the Company shall be entitled to receive capital stock, securities or assets
with respect to or in exchange for their shares, then the following provisions
shall apply:
III.5.1 As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition
(except as otherwise provided below in this Section 3.5), lawful and adequate
provisions shall be made whereby the holder of Warrants shall thereafter have
the right to purchase and receive upon the terms and conditions specified in
this Warrant and in lieu of the Warrant Shares immediately theretofore
receivable upon the exercise of the rights represented hereby, such shares of
capital stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding shares of such Common Stock equal to
the number of Warrant Shares immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger, share exchange or sale
not taken place, and in any such case appropriate provision reasonably
satisfactory to such holder shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and of the
number of Warrant Shares receivable upon the exercise) shall thereafter be
applicable, as nearly as possible, in relation to any shares of capital stock,
securities or assets thereafter deliverable upon the exercise of Warrants.
III.5.2 In the event of a merger, share exchange or consolidation of the
Company with or into another Person as a result of which a number of shares of
Common Stock or its equivalent of the successor Person greater or lesser than
the number of shares of Common Stock outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Exercise Price in effect immediately prior to such merger, share
exchange or consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the outstanding shares of Common Stock.
III.5.3 The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger of the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the holder hereof at the
last address of such holder appearing on the books of the Company the obligation
to deliver to such holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the holder hereof, such successor Person will issue a
new warrant revised to reflect the modifications in this Warrant effected
pursuant to this Section 3.5.
III.5.4 If a purchase, tender or exchange offer is made to and accepted
by the holders of 50% or more of the outstanding shares of Common Stock, the
Company shall not effect any consolidation, merger, share exchange or sale,
transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the exercise of the
Warrants either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
III.6 Adjustment for Asset Distribution. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Exercise Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per share
of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for the
purpose of such dividend or distribution or, if a record is not taken, the date
as of which holders of record of Common Stock entitled to such dividend or
distribution are determined.
III.7 De Minimis Adjustments. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments which by reason of this Section 3.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
8
<PAGE>
III.8 Notice of Adjustment. Whenever the Exercise Price or the number of
Warrant Shares issuable upon the exercise of the Warrants shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock, securities
or assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based. The Company shall cause to be mailed to the holder
hereof copies of such Officer's Certificate together with a notice stating that
the Exercise Price and the number of Warrant Shares purchasable upon exercise of
the Warrants have been adjusted and setting forth the adjusted Exercise Price
and the adjusted number of Warrant Shares purchasable upon the exercise of the
Warrants.
III.9 Notifications to Holders. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in capital
stock or make any special dividend or other distribution (other than cash
dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders of its
Common Stock any additional shares of capital stock of any class or other
rights;
(iii) to effect any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation, merger or share exchange of
the Company with another Person, or sale, transfer or other disposition of
all or substantially all of its assets; or
(iv) to effect a voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder hereof
(a) at least 10 days' (but not more than 90 days') prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days'
(but not more than 90 days') prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto,
and such notice in accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock, as the case may be, for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
share exchange, sale, transfer, disposition, dissolution, liquidation or winding
up, as the case may be.
III.10 Company to Prevent Dilution. If any event or condition occurs as to
which other provisions of this Article III are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Warrant, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Exercise Price and the number of Warrant Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Article III except in the event
of a combination of shares of the type contemplated in Section 3.4 hereof, and
then in no event to an amount greater than the Exercise Price as adjusted
pursuant to Section 3.4 hereof.
9
<PAGE>
ARTICLE IV
MISCELLANEOUS
IV.1 Entire Agreement. This Warrant, together with the Agreement, contains
the entire agreement between the holder hereof and the Company with respect to
the Warrant Shares purchasable upon exercise hereof and the related transactions
and supersedes all prior arrangements or understandings with respect thereto.
IV.2 Governing Law. This warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
IV.3 Waiver and Amendment. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant shall be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
IV.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
IV.5 Copy of Warrant. A copy of this Warrant shall be filed among the
records of the Company.
IV.6 Notice. Any notice or other document required or permitted to be given
or delivered to the holder hereof shall be in writing and delivered at, or sent
by certified or registered mail to such holder at, the last address shown on the
books of the Company maintained at the Warrant Office for the registration of
this Warrant or at any more recent address of which the holder hereof shall have
notified the Company in writing. Any notice or other document required or
permitted to be given or delivered to the Company, other than such notice or
documents required to be delivered to the Warrant Office, shall be delivered at,
or sent by certified or registered mail to, the offices of the Company at 3748
Highway #45 North, Columbus, Mississippi 39701 or such other address within the
continental United States of America as shall have been furnished by the Company
to the holder of this Warrant.
IV.7 Limitation of Liability; Not Stockholders. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
10
<PAGE>
IV.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
this Warrant, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity or such other security in such form and amount
as shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of this Warrant, the Company will
make and deliver a new warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any warrant issued under the provisions of this
Section 4.8 in lieu of any Warrant alleged to be lost, destroyed or stolen, or
in lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly canceled
by the Company upon the surrender hereof in connection with any exchange or
replacement. The Company shall pay all taxes (other than securities transfer
taxes or income taxes) and all other expenses and charges payable in connection
with the preparation, execution and delivery of warrants pursuant to this
Section 4.8.
IV.9 Registration Rights. The Warrant Shares shall be entitled to such
registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement and the
Agreement.
IV.10 Headings. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: October 10, 1997
BLACK WARRIOR WIRELINE CORP.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
12
<PAGE>
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented thereby and to purchase thereunder,
________ shares of the Common Stock covered by such Warrant, and herewith makes
payment in full for such shares pursuant to Section 1.1 of such Warrant, and
requests (a) that certificates for such shares (and any other securities or
other property issuable upon such exercise) be issued in the name of, and
delivered to _____________________________________ and (b) if such shares shall
not include all of the shares issuable as provided in such Warrant, that a new
warrant of like tenor and date for the balance of the shares issuable thereunder
be delivered to the undersigned.
Date:
13
<PAGE>
ASSIGNMENT
For value received, _______________________, hereby sells, assigns, and
transfers unto _________________________ the within Warrant, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ________________________ attorney, to transfer such Warrant on the books
of the Company, with full power of substitution.
Date:
14
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (this "Amendment") is
made as of October 10, 1997, by and between Black Warrior Wireline Corp., a
Delaware corporation (the "Company"), and St. James Capital Partners, L.P., a
Delaware limited partnership (the "Purchaser").
WHEREAS, on June 5, 1997, the Company and the Purchaser entered into a
Registration Rights Agreement (the "Original Registration Rights Agreement"),
pursuant to which the Company granted the Purchaser certain registration rights
in respect of the Shares (as such term is defined in the Original Registration
Rights Agreement);
WHEREAS, on June 5, 1997, the Purchaser acquired from the Company a
Convertible Promissory Note (the "Original Convertible Note") in the original
principal amount of $2,000,000, which is convertible into the number of shares
as set forth in the Original Convertible Note (the "Original Convertible Note
Shares") of the Company's common stock, par value $.0005 per share (the "Common
Stock");
WHEREAS, on June 5, 1997, the Company issued Warrants to Purchase Common
Stock of the Company (the "Original Warrants") to Purchaser in respect of an
aggregate of 666,000 shares of Common Stock (the "Original Warrant Shares");
WHEREAS, pursuant to the terms of the Agreement for Purchase and Sale dated
as of the date hereof between the Company and the Purchaser, the Purchaser has
agreed to purchase a 7% Convertible Promissory Note from the Company to
Purchaser dated as of the date hereof, in the original principal amount of
$2,900,000 (the "New Note"), which is convertible into shares of the Common
Stock (the "New Note Shares");
WHEREAS, as of the date hereof, the Purchaser issued Warrants (the "New
Warrants") to the Purchaser, which may be exercised to purchase shares of the
Common Stock, at $4.6327 per share, subject to adjustment (the "New Warrant
Shares");
WHEREAS, the Company wishes to grant the Purchaser certain registration
rights in respect of the Original Convertible Note Shares, the New Warrant
Shares and the New Note Shares, as set forth herein;
WHEREAS, the Company wishes to amend the Original Registration Rights
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
<PAGE>
1. Each reference in the body of the Original Registration Rights Agreement
to the Shares shall hereafter refer to, collectively, the Original Warrant
Shares, the Original Convertible Note Shares, the New Note Shares and the New
Warrant Shares.
2. Each reference in the body of the Original Registration Rights Agreement
to Warrants shall hereafter refer to, collectively, the Original Warrants and
the New Warrants.
3. Section 1.3 of the Original Registration Rights Agreement shall be
revised to read in its entirety as follows:
"1.3 "Registrable Securities" shall mean (i) the Shares; and (ii) any
Common Stock issued or issuable at any time or from time to time in respect
of the Shares upon a stock split, stock dividend, recapitalization or other
similar event involving the Company until such Shares are registered
pursuant to a Registration Statement or the exemption from registration
under Rule 144(k) (or successor Rule) under the Securities Act is available
with respect to the Shares."
4. The reference to "1997," in the first line of Section 2.1.1 of the
Original Registration Rights Agreement shall be deleted.
5. By their execution of this Amendment, both the Company and the Purchaser
agree to be a party to, and bound by, the terms of the Original Registration
Rights Agreement, as amended by this Amendment.
6. This Amendment shall be governed in all respects by the laws of the
State of Delaware.
7. All other terms and conditions of the Original Registration Rights
Agreement shall be and remain the same and in full force and effect.
8. Capitalized terms used but not otherwise defined herein shall have the
meaning given them in the Original Registration Rights Agreement.
9. This Amendment may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
<PAGE>
THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this Amendment effective
upon the date first set forth above.
BLACK WARRIOR WIRELINE CORP.
By:
William L. Jenkins, President
3
<PAGE>
THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Purchaser has signed this Amendment as of the date
first written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its General Partner
By:
Jay Brown, Vice President
4
